Infographic By: David Hessel, Fiduciary Financial Advisor in Brookfield Wisconsin
On March 11, 2020, the Dow Jones Industrial Average (DJIA) officially entered a bear market. This drop brought the all-time high of 30,000 to 19,000 in a matter of weeks amidst the COVID-19 global pandemic. As we face an uncertain road ahead, let’s take a look back at history’s most recent bull and bear markets, as outlined by the S&P 500.
Bear Market: Marked by a 20% (or more) drop in securities prices from the most recent high, resulting in investor distrust & a downward trend in value.
Bull Market: An extended period in time in which stocks & other traded commodities continuously rise in value.
Looking for guidance on how to be financially stress-free? Schedule a 30-Minute Phone Call with David Hessel, Fiduciary Financial Advisor in Brookfield Wisconsin, here or send him an email at firstname.lastname@example.org.
You can find the original post here.
GVCM is an SEC Registered Investment Advisory firm, headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188. PH: 262.650.1030. David Hessel is an Investment Adviser Representative (“Adviser”) with GVCM. Additional information can be found at: https://www.adviserinfo.sec.gov/IAPD/Global View Capital Insurance, LTD. (GVCI) insurance services offered through ASH Brokerage and PKS Financial. David Hessel is an Insurance Agent of GVCI. Global View Capital Advisors, LTD is an affiliate of Global View Capital Management, LTD (GVCM). This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
You may (or may not) have heard that the Dow Jones has been dropping it like it’s hot lately, dipping 1,150 points just last week. World events and uncertain economic conditions can result in market volatility — when the stock market changes moods faster than your teenage sister. But, what exactly is the Dow Jones? And why has it been making major money moves recently?
The Dow Jones Industrial Average (DJIA) is a stock market index that includes 30 large, U.S. publicly-traded companies and acts as a thermometer, testing the overall health of the U.S. marketplace. Sounds a lot like the S&P 500 index, right?
Here are several key differences between the S&P 500 and the DJIA:
S&P 500 Dow Jones (DJIA) Founded in 1957 Founded in 1896 500 of the largest U.S.-based publicly-traded companies across all industries 30 of the largest U.S.-based publicly-traded companies across all industries (originated with just 12 companies solely in the industrial sector) Companies selected by S&P Committee (owned by McGraw Hill Financial) Companies selected by Dow Jones & Co. Averages Committee Companies selected based upon specific qualification criteria No defined criteria for how a company is selected — generally, must be a large leader in their industry Stocks within the index are weighted by market capitalization (market cap = # of outstanding shares x market price) Stocks within the index are price-weighted (the higher the stock’s market price, the more influence it will have on the index’s performance) Often considered the “single best indicator” of stock market performance, because of its broad and diverse collection of companies across all industries Most well-known stock market index. But, because if its exclusivity (only represents 30 of over 3,000 US public companies), it is more an indicator of blue-chip stocks than the market overall
OK, now that we’ve got a grasp on what the Dow Jones Index is, let’s talk about why it’s been dropping faster than your bank account after a trip to Target.
The stock market can be affected by many factors, such as political changes, natural disasters, inflation, interest and exchange rates, and unexpected world events — just to name a few. Most recently, when the Dow Jones stumbled and fell by 4 percent in early October, it was likely due to sipping a cocktail of rising Treasury yields, the increased Federal Funds rate, and the China-U.S. trade war. Just like how you get a little wobbly after drinking one too many cocktails, the stock market also gets shaky (see: volatile) when too many uncertain events are mixed together at the same time. The stock market: it’s just like us.
But, not to fear. Similarly to how you will drink lots of water, take an Advil, and eat greasy food to bounce back after a night out, the stock market bounces back, too. Usually, the severity of the market fall will determine how long it will take to rebound. Small corrections can be overcome in just a few days, whereas a full-blown financial crisis may take years to recover from (think: the 2008 Great Recession).
To recap: the Dow Jones is the most well-known market index, comprised of only 30 companies across various industries, and is used to evaluate general trends in the stock market. Recently, the Dow Jones took a big tumble due to a woozy cocktail of world events and interest rate changes. But, don’t worry. Analysts remind us that the market often panics over everything and can sometimes be a bit overdramatic…#Relatable. So, for now, be prepared to ride the roller coaster of market volatility, because over the long-term, the market always trends upward. Ask Warren Buffett.
Congratulations! You now know what the Dow Jones is and why it’s been in the headlines lately. But, this article was not meant to be an in-depth analysis of the Dow Jones (because ain’t nobody got time for dat). If you’d like to dig in a little deeper to the topics covered above, feel free to click on any of the hyperlinks (including that one) to become a Dow Jones expert. You’re welcome.
Written By: Kaitlyn Duchien (@ktaylor1395)
Contact Us: email@example.com