Long Term Perspective  

The Dow Jones Industrial Average is the most widely quoted stock index in the media. As a result, most non-professional investors compare their personal portfolios to the Dow. In fact, investment professionals prefer other market measures. The Dow is a price-weighted index; this means that higher priced stocks have a greater weight than lower priced stocks. This contrasts to the S&P 500, a capitalization-weighted index where the size of the company determines its weight in the index.

After decreasing 0.6 percent in 2005, the Dow Jones Industrial Average rebounded a smart 16.3 percent in 2006. The 10-year average of the annual gains continued to slip in 2006 to 7.8 percent from 8.8 percent in 2005. This was the weakest 10-year average since 7.6 percent in 1986.

Short Term Perspective

The 30 industrials in this index are: Alcoa, Altria, American Express, American International Group, Boeing, Caterpiller, Citigroup, Coca-Cola, Walt Disney, DuPont, Exxon Mobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Honeywell, IBM, Intel Corp., J.P.Morgan Chase & Co., Johnson & Johnson, McDonald’s, Merck, Microsoft Corp., 3M, Pfizer, Procter & Gamble, SBC Communications, United Technologies, Verizon Communications, and Wal-Mart Stores.

On a year-over-year basis, the Dow Jones Industrials was up 9.4 percent in November, down from than the 15.3 percent gain in October. As of the end of November, the DJIA was up 7.3 percent over its December 2006 year-end level.

The Dow performed quite well overall in 2006. This year has been much more volatile. The trend was up during most of the first half of 2007.  But subprime concerns pulled the Dow down in June and July and then again in November. In between, Fed interest rate cuts had provided a boost. The Dow Jones Industrials fell 4.0 percent in November 2007, following a 0.2 percent gain the prior month.