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.

The 2000-2001 declines in the DJIA brought the 10-year average down to 13 percent in 2001 from a level of 15.8 percent in 2000. For long-term investors, this still represents solid returns.

Short Term Perspective

The 30 industrials in this index are: AT&T, Alcoa, American Express, Boeing, Caterpiller, Citigroup, Coca-Cola, Walt Disney, DuPont, Eastman Kodak, Exxon Mobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Honeywell, IBM, Intel Corp., International Paper, J.P.Morgan Chase & Co., Johnson & Johnson, McDonald's, Merck, Microsoft Corp., 3M, Phillip Morris, Procter & Gamble, SBC Communications, United Technologies and Wal-Mart Stores.

The DJIA peaked in mid-January 2000 and subsequently reversed direction during most of the year. 2001 and 2002 were even more devastating years for the DJIA. Investors are still wondering whether the market has touched bottom.

The Dow gained 5.9 percent in November after a 10.6 percent hike in October, reversing the September drop. Nevertheless, the Dow increased only five times in the past twelve months.