The Dow Jones Industrial Average (DJIA or “the Dow”) crossed the 40,000 level in mid-May. This was perhaps an inevitability, given that stocks have always reached new highs, given enough time. Nonetheless, investors take notice of such milestones, which provides an opportunity to reflect on markets.

We noted in our February Investment Guide that the Dow is just one of several indices used to measure the stock market. The S&P 500 Index is a more useful market gauge for most investors, but the Dow is still broadly cited. It is a venerable index created in 1896, comprised of 30 stocks selected by a committee intended to reflect a spectrum of major U.S. industries. As a price-weighted index, it is a simple average of the 30 stock prices. This contrasts with the S&P 500 and other major indices, which are market capitalization weighted. Despite the oddities of its construction, the Dow has served well as a means of gauging the U.S. stock market over time.

The table below shows how long it took the Dow (based on daily valuation) to get from one major threshold to the next. This obscures the massive fluctuations that investors experienced between each level. The most recent threshold of 40,000 comes less than three years after the 35,000 level was notched.

Also In This Issue

Luck Of The Draw: Sequence Of Returns
The Shift To T+1 Settlement
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles