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It’s Birthday Cake Time!

Happy Birthday to the Dow Jones Industrial Average! 125 years young. What started as a 12-company index of industrial companies (hence the “Industrial” part of the Dow Jones Industrial Average) published on May 26, 1896 has grown into one of the most watched financial bellweathers in the world. It aims to represent the entire US stock market with just 30 publicly-traded American companies today. Check out the very cool map of who has been in and who has been out since the 30-name rule was set in 1928, courtesy of Visual Capitalist.

The DJIA serves as a quick pulse on the overall economy. When it was started, the health of its industrial companies served as a proxy for the health of the nation. The first 12 were:

American Tobacco | American Sugar | American Cotton Oil | Chicago Gas | General Electric | Distilling and Cattle Feeding | Laclede Gas | National Lead | North American | Tennessee Coal, Iron, and Railroad  | U.S. Rubber | U.S. Leather

None of these names are included on the current list of 30. In fact, General Electric is the only name still around as a company! Everyone else was bought-up, merged out, or went out of business. Thankfully, the index is proactive and adaptive.

A committee evaluates what names best reflect the economic picture. Their goal is to keep up with the times while not making constant changes. The average length of time on the DJIA for the current 30 names is about 22 years, with Procter & Gamble being the longest-lasting name in the group since its addition in 1932. In the last 92 years, 93 changes have been made. It’s because of these changes that when many people refer to “The Market”, what they are actually talking about is the Dow Jones Industrial Average.

Happy Birthday, DJIA. I hope you chill out in your old age.

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