It was only a matter of time, and it has finally happened, General Motors has filed for bankruptcy and has been taken out of the Dow Jones Industrial Average. On the same day it was announced that Citigroup would be removed from the Dow because of the government’s massive ongoing stake in the company. Who are the two replacements for General Motors and Citigroup? The two companies that will be moving into the Dow Jones are Cisco Systems and Travelers. Travelers will essentially be replacing Citigroup, which it was a part of just a few years ago, so that replacement is certainly quite ironic. Cisco’s replacement of General Motors signals a fairly major change in the overall weighting of the Dow Jones Industrial Average, moving it more towards technology and less toward old industrials and cyclical.
One could make a very solid case that the Dow Jones Industrial Average has just become much more relevant because of these changes, which will officially occur on June 8th. Getting rid of these two companies that were weighing down the Dow because of their terrible position in today’s economy in itself is a major boost, and the two companies that are moving into the Dow both seem to be doing quite well. Travelers Company is an insurance company that has been doing much better than most in its industry, and has managed to keep its losses to a minimum during this economic downturn. Cisco Systems is a leading technology company that is storming around the world with its routers and networking equipment and other odds and ends to help people and businesses connect all around the world.
Over the past few years the Dow Jones Industrial Average has lost a bit of its luster with many market analysts and strategists because they believed it was behind the curve. The moves that are now being made will be a major step in the direction of making the Index a very viable one with a solid mixture of healthy companies from lots of industries. Technology is clearly going to be needed in the future for advances, so the fact that the Dow will now have five technology stocks will likely be a long-term boost to the index. Also, the movement of two companies into the index that have a very solid balance sheet and are loaded with cash is another sign that the Dow is becoming more modern and relevant.
The S&P 500 is a much broader index than the Dow, so it will be difficult to gauge the two against one another, but the Dow has certainly made some major inroads into becoming a market leader once again. Investors who have previously shunned things such as Dow Jones Index Funds or ETF’s that track the Dow and its movement may want to rethink their moves in the coming quarters and consider making it a part of their portfolio. It may be difficult to regain all the luster that the Dow has lost in one day, but the changes and replacements it has made have gone a long way toward improving its reputation.....
Dow Jones Industrial Average More Relevant Now.....
Labels: Dow Jones |Tags:
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment