The Dow Jones Industrial Average (DJIA), also known as the Dow, is a stock market index that measures the stock performance of 30 large companies listed on the New York Stock Exchange (NYSE) and the Nasdaq. It is one of the oldest and most widely followed stock market indices in the world, and its history provides valuable insights into the evolution of the U.S. economy and financial markets.
The DJIA was created by Charles Dow and Edward Jones on May 26, 1884, as a way to track the performance of 11 industrial companies. The index initially included:
By 1928, the DJIA had expanded to include 30 companies, and it became the standard measure of the U.S. stock market.
The Great Depression, which began with the stock market crash of 1929, had a devastating impact on the DJIA. The index fell by over 89%, from a high of 381.17 on September 3, 1929, to a low of 41.22 on July 8, 1932.
After World War II, the U.S. economy experienced a period of rapid growth and prosperity. The DJIA rose steadily, reaching a high of 938.65 on February 20, 1966.
The Vietnam War and the associated inflation put pressure on the stock market. The DJIA fell by nearly 30% during this period, from a high of 995.72 on February 9, 1966, to a low of 691.02 on May 17, 1970.
President Ronald Reagan's policies of tax cuts and deregulation helped to boost the economy and the stock market. The DJIA rose by over 200% during Reagan's presidency, from a low of 776.92 on August 12, 1982, to a high of 2,958.25 on January 11, 1987.
The Dot-Com Bubble was a period of rapid growth in the stock market, driven by the rise of internet companies. The DJIA rose by over 100% during this period, from a low of 5,882.29 on August 1, 1998, to a high of 11,722.98 on January 14, 2000.
The Great Recession, which began with the subprime mortgage crisis, had a significant impact on the stock market. The DJIA fell by over 50% during this period, from a high of 14,164.53 on October 9, 2007, to a low of 6,547.05 on March 9, 2009.
After the Great Recession, the DJIA embarked on a long period of growth. The index reached a record high of 29,551.43 on February 12, 2020, before falling sharply due to the COVID-19 pandemic. The DJIA has since recovered and is currently trading at around 34,000.
Over the course of its history, the DJIA has exhibited several key trends:
Despite periods of volatility, the DJIA has shown a long-term trend of growth. The index has increased by over 100,000% since its inception in 1884.
The DJIA is closely tied to the U.S. economy. The index tends to rise during periods of economic growth and fall during periods of economic recession.
Inflation and interest rates can have a significant impact on the DJIA. High inflation and interest rates can put pressure on corporate profits and stock prices.
Technological changes have had a major impact on the DJIA. The rise of new industries, such as the internet and technology, has led to the creation of new companies that have been added to the index.
Technical analysis is a method of evaluating the future direction of a security by studying its past price movements. Technical analysts use charts and indicators to identify trends, patterns, and support and resistance levels.
Fundamental analysis is a method of evaluating the intrinsic value of a security by analyzing its financial statements and other factors. Fundamental analysts look at a company's earnings, revenue, debt, and other financial metrics to assess its health and prospects.
Event | Date | DJIA Close |
---|---|---|
Creation of the Dow Jones Industrial Average | May 26, 1884 | 40.60 |
Great Depression | 1929 - 1939 | 41.22 |
Post-War Boom | 1945 - 1966 | 938.65 |
Vietnam War and Inflation | 1967 - 1981 | 691.02 |
Reagan Revolution | 1982 - 1992 | 2,958.25 |
Dot-Com Bubble | 1995 - 2000 | 11,722.98 |
Great Recession | 2008 - 2009 | 6,547.05 |
Post-Recession Recovery | 2010 - Present | 34,000 |
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