Question

“The Dow Jones Industrial Average (DJIA) is simply the average value of 30 large industrial stocks. Big companies like General Motors, Goodyear, IBM, and Exxon are the kind of companies that make up this index” (Lott, 2008)read the What is the Dow Jones Industrial Average? and the Dow Jones Industrial Average.

Using the structure of the Dow and after reviewing the graphs for the first and second quarters of the year, describe the activity that has occurred this year.

Answer 1

Dow Jones is a a price weighted index and it is a combination of reflection of top 30 companies which are non tech companies of the United States.

Dow Jones industrial Average will reflect the fluctuation in the price of of top 30 companies according to their respective weights into the index and it is one of the most followed index into the overall global economy and it will be comprising of stocks like Boeing,General motors etc.

This year Dow Jones has started on a very good note because of of expectation of improvement into the overall state of economy and it has hit lifetime highs, but after the the fear of pandemic kicked in, it went into a bear market territory by correcting around 40% from its recent highs and there was an environment of complete panic because the economy was expected to get into a recession due to lock down and people were fearing and impending recession and there was huge loss of employment in the country but due to the proactive measures of Federal Reserve and Central Government, Dow Jones has recovered quite swiftly and it is almost back to the lifetime highs