It feels like 2 weeks ago that I was thinking about DOW 20,000 and what that meant. Now, we’re at DOW 25,000. That’s a 25% increase! It hit 20,000 in late January of 2017. It sure doesn’t feel like it’s been nearly a year. At least the last 12 months haven’t very interesting at all. (Dripping with sarcasm)
Let’s start with what the Dow Jones Industrial Average actually is first because I feel it’s important for some perspective. ‘The DOW’ as it’s often called, is a price-weighted index of 30 blue-chip stocks. Price-weighted simply means that the stocks with the highest share prices within the index carry the most weight. Therefore, stocks with higher share prices (such as McDonald’s, Boeing and Caterpillar) will move the index more than stocks with lower share prices (such as General Electric, Pfizer and Intel).
So, while the DOW is at an all-time high as I write this (January 11, 2018) it doesn’t necessarily mean all 30 DOW stocks are at an all-time high. I saw a pretty cool infographic the other day that broke down the 5,000-point gain from DOW 20,000 to DOW 25,000. It revealed the top five stocks and how many points each company added to the 5,000 total. Below is a list of the top-5 performers and how many points they contributed to the 5,000 gain:
- 898 points
- 429 points
- 407 points
- 406 points
- 355 points
One company alone contributed nearly 900 points to the 5,000-point gain BY ITSELF!
Now that we know the top five, it sort of begs the question; what were some of the laggards on the DOW from 20,000 to 25,000? Well, there were actually three stocks that were a literal (and figurative) drag on the DOW during this historic run:
- Negative 114 points
- Negative 82 points
- Negative 27 points
There are 30 stocks in the DOW and we just took a look at the five best performers and the three worst performers. There are 22 others that helped get us to 25,000. Sort of like a school project, some carried more weight than others.
I wanted to share this with you to illustrate how individual stocks make an index move. Specifically, the DOW, because it seems to get most of the media attention for whatever reason. I also wanted to show you that just because the DOW (or any other index for that matter) is at or near an all-time high, it doesn’t necessarily mean that each stock within the index is also at or near an all-time high.
So, thank you to those top 5 performers for leading the charge. As for those three laggards? Time to step it up. You’re real drag. (See what I did there?)
Ok, that’s it. I’m done.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.