Using tweets to predict the stock market

Economic History: The Dow Jones Industrial Average

Sep 12, 2013 • 428 Views

During the last few years, the list of the Dow Industrials has reflected the casualties of the Great Recession. In 2008 the insurance firm AIG was dropped, General Motors left in 2009 and now Bank of America is going. Actually, if we look back, the Dow gives us a pretty good snapshot of US economic history.

Railroads:

  • When the Dow was first  published in July, 1884, it had 11 stocks–9 railroads and 2 industrials.

From: CME Group

This was the first Dow Jones Industrial Average (DJIA):

Economic History the DJIA 2

From: CME Group

Autos:

  • Car makers and others related to the auto industry like Goodrich began to appear in 1915 and 1916 in a Dow Industrial Average that expanded to 20 firms.
From: CME Group

From: CME Group

Consumers:

  • Finally, during the 1920s, the consumer arrived with Sears and with Woolworth (a 5 & 10 cent store) and more car companies.
From: CME Group

From: CME Group

Computers:

  • IBM was added in 1979, followed by Hewlett-Packard in 1997 and then Microsoft in 1999.
From: CME Group

From: CME Group

The current Dow will change when markets close on September 20 and Hewlett-Packard, Bank of America and Alcoa are replaced by Goldman Sachs, Visa and Nike. Dow publicity said that slumping stock prices and the need to diversify the list of firms is the reason. Instead, I rather like one analyst’s conclusion that the Dow is a lagging indicator displaying an industrial “Hall of Fame.” With their current difficulties, the departing firms no longer are “stars” while Goldman, Visa and Nike occupy center stage.

From: CME Group

From: CME Group

Whereas the first Dow was primarily railroads, now, health care, financials and information technology compose almost half of the Dow list.

Sources and resources: Explaining why the DJIA is “ridiculous,” this Washington Post column might be right. For more Dow history, you could go here while this Business Insider article gives some insight about the September 20 Dow changes.

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