Dow Jones reached a new record. (Source: finance.yahoo.com).
The American economy was in recession from 2008 to 2010, and has been in a slow recovery ever since. While not indicative of our greater economy, fluctuations in the stock market can reflect trends in consumer confidence.
The Dow Jones Industrial Average (DJIA) is a group of 30 large companies ranging from Boeing to McDonald’s to Verizon. It doesn’t give an overarching picture of our economy, but economists look to the DJIA as a reflection of our stock market. The DJIA, one of the main indicators of our stock market, dropped from a high of just under 14100 points in late 2007 to a low of just above 6700 points in late 2009; more than half of the Dow Jones’ worth was lost in two years. But in March, 2013, the Dow Jones reached a new record at 14540 points. Since the Dow is higher than is ever has been, these 30 companies are doing well, and a new high for the one of the central indicators of the stock market is indicative of increased consumer investment and confidence.
The NASDAQ, another important indicator of our stock market, is also on the uptick. The NASDAQ consists of multiple indices each with different company components. The NASDAQ Composite is the largest index of NASDAQ. It consists of over 3000 companies, giving a larger picture of the private sector. The NASDAQ-100 consists of the 100 largest non-financial companies of NASDAQ. Thus, when NASDAQ as a whole goes up, the economy is more likely to improve. Its record remains in 2001, with 5050 points, and dropping after that date. It slowly rose, but dropped again in the 2007 recession. However, the NASDAQ reached 3253 points on March 11th 2013. That is the highest since early 2001.
With both the Dow Jones and the NASDAQ going up—the Dow higher than ever and the NASDAQ higher than it has been in a decade—it’s safe to say that the economy is doing better than it was in 2008. Nonetheless, other key economic indicators point to very slow growth, which remains a concern of economists. However, as the speculative arm of the economy, strength in the stock market are certainly of note.
