Dow a poor indicator

Discussion in 'Stock Market' started by HenryWallace, Dec 29, 2016.

  1. HenryWallace
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    HenryWallace Member

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    Experts agree the DJIA is a poor indicator of the economy. Yet people, even smart people, are championing Dow 20000 and stuff like that. Every other thread on this board says "Dow up _%". Sure, most of these are from uneducated Trumpkins who don't have the first clue about business/finance. But even some Wall Street people care about these milestones. Why??
     
  2. miketx
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    miketx Platinum Member

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    I'd be great if Clinton had won though, right?
     
  3. HenryWallace
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    HenryWallace Member

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    It's been a poor indicator forever. Even Charles Dow didn't check it daily

    Try again
     
  4. william the wie
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    william the wie Gold Member

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    It's a good indicator of where financial markets are at the moment and how they are doing as a savings vehicle.
     
  5. DrainBamage
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    DrainBamage Silver Member

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    Kind of. It is an economic indicator, but it also measures perceptions and expectations in additional to economic fundamentals. If you look at a chart of DJIA with economic recessions overlaid it generally lines up, as in a recession measured as negative GDP growth will correspond with drop in stock market. That doesn't mean at any given moment in time a strong stock market means good economic times are ahead, but as a macro-indicator it's fair to say DJIA corresponds to economic strength.

    I assume this is just self-interest. People have money in stock funds in their 401k, when they see DJIA went up on the news and go look at their 401k the balance is higher. Same as it going down, their balance is lower so that also interests them.
     

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