Personal Finance: Last Tuesday, without any fanfare, a dream came true on Wall Street
Saturday 20 March 1999
It was before the turn of this century that the DJIA came into being. Then it had just 12 constituents. During the First World War this measure of the market's mood was expanded to include 20 stocks, and not long before the great Wall Street crash of 1929 it reached the 30 share mix it is today.
The crash brought the index back down below 100, a figure that was to be breached on the downside again during the Second World War. But we then entered a period of buoyant markets, with share prices nudging the 1,000 level by the middle 1960s. It was not until 1972 that this barrier was conquered properly.
The bull market of the early 1970s was brought to an abrupt end by the Yom Kippur war and the quadrupling of the price of oil. We suffered more here than in the US in share price terms, but this market shock brought prices back to their mid-1960s level even there. Good news then became a rarity for a few years.
From the mid-1960s to the early 1980s the US market moved sideways. When the bull phase in which we now all rejoice started just 17 years ago, the index was still around the 1,000. Even the events that followed Black Monday in 1987 were but a hesitation for a market that was driving ever upwards - 5,000 fell just a few years ago. And now 10,000 is being played with by the Wall Street bulls.
Unfortunately, nobody takes any notice of the Dow Jones Industrial Average these days. Just as the FT 30-share index has been consigned to history, money managers prefer a broader picture against which to measure their performance. The S&P 500 is favourite - just as the 700-plus share constituency of the FT Actuaries All Share is the one most managers use on this side of the Atlantic. But the Dow Jones is a piece of history that none of us should ignore.
Indices can be very misleading. One of the reasons that managers take little notice of the Dow Jones Industrial Average is that it is too narrowly based. It does not include America's largest company in stockmarket terms, for example. Microsoft is quoted on NASDAQ, an index which has registered the largest gains during this bull run by virtue of the number of technology stocks traded on this market. But there is no denying that attaining such a landmark as 10,000 sends a frisson of excitement through the trading floors.
Remember that this is not as important an event as you might think so don't be surprised if your US investments have not grown by as much as this latest development imply. Supporters of smaller companies will have lost out in recent years.
It is the advent of the computer that has made these more representative indices possible, not just a widening of investment opportunities.
Brian Tora is head of Greig Middleton Asset Management
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