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re: GDP up 4.1%; why is Dow dropping 30 points?
Posted on 7/28/18 at 2:33 pm to Joshjrn
Posted on 7/28/18 at 2:33 pm to Joshjrn
quote:I don’t get why the Dow gets so much focus anyways. Besides the limited number of companies, the price weighting often makes movement dependent solely on one or two stocks, like Caterpillar when they had that guidance that sent the stock in a free fall for a day.
The Dow tracks 30 companies. That's it. Why people act like it's some magic shorthand to tracking the entire economy is beyond me.
It just seems that S&P 500 and the other various indexes (Russell 3000, miscaps, etc) are far more reliable, far more representative of the market and various components of it, and far more meaningful for most people invested in the broader market.
1
Posted on 7/28/18 at 3:01 pm to buckeye_vol
quote:
Why would any fund made up of stocks, follow the broader economy? And why would we want it follow anything but the market the ETF is investing in, especially since that market grows much faster than the broader economy?
No clue; ask OP
Posted on 7/28/18 at 3:17 pm to buckeye_vol
quote:Follow the broader economy? Not so much.
Why would any fund made up of stocks, follow the broader economy?
Stock prices are contingent on earnings and growth. Those are economically dependent. Assuming the particular fund contains stocks inclusive of a broad swath of sectors, performance should logically be a representative economic indicator.
In historical terms, I believe market performance tends to be a fairly reliable leading economic indicator.
This post was edited on 7/28/18 at 3:19 pm
Posted on 7/28/18 at 3:37 pm to buckeye_vol
quote:Each DJ 30 stock is weighted equally. A $1 rise or fall in any stock in the DJIA moves the index the same amount.
I don’t get why the Dow gets so much focus anyways. Besides the limited number of companies, the price weighting often makes movement dependent solely on one or two stocks,
NASDAQ is price weighted based on market cap of each stock in it. A $1 change in AMZN moves the NASDAQ much more than a $1 change in Iberia Bank, for example.
Posted on 7/28/18 at 6:25 pm to buckeye_vol
Let’s be very careful here.
To say this is totally reasonable:
“The stock market is not the economy.”
To say this is totally unreasonable:
“The economy has no impact on the stock market.”
Nearly every major economic event can be expected to have some gross impact on the market. Whether the effect of that event is offset by other events may determine the net impact on the market, but the economy is still a major factor.
From a statistical standpoint, the coefficient of determination of the economy’s impact on the stock market is not 1.0. But I guarantee you it’s still very significant - perhaps 0.3 or higher. So, yes, GDP performance would be expected to have an impact on the market, but that impact will be tempered by both other factors and what that GDP performance is relative to expectations. As you can see below, on average, the stock market contracts during recessions:
Perhaps not the broadest proxy for the market at large, but the one that is most widely used for fund performance benchmarking and as a general barometer of “the market” is the S&P500.
To say this is totally reasonable:
“The stock market is not the economy.”
To say this is totally unreasonable:
“The economy has no impact on the stock market.”
Nearly every major economic event can be expected to have some gross impact on the market. Whether the effect of that event is offset by other events may determine the net impact on the market, but the economy is still a major factor.
From a statistical standpoint, the coefficient of determination of the economy’s impact on the stock market is not 1.0. But I guarantee you it’s still very significant - perhaps 0.3 or higher. So, yes, GDP performance would be expected to have an impact on the market, but that impact will be tempered by both other factors and what that GDP performance is relative to expectations. As you can see below, on average, the stock market contracts during recessions:
Perhaps not the broadest proxy for the market at large, but the one that is most widely used for fund performance benchmarking and as a general barometer of “the market” is the S&P500.
Posted on 7/28/18 at 6:34 pm to LSURussian
Hey Ruskie FYI, think I'm about ready to hang it up in Dec.
Had a bit of a C scare. Not nearly as bad as yours, but similar.
Anyway, we hit our "number" a while back.
So I'm done with call and 80hr wks.
If you need a 9-5 M-F banking partner though . . . . ? 
Had a bit of a C scare. Not nearly as bad as yours, but similar.
Anyway, we hit our "number" a while back.
So I'm done with call and 80hr wks.
If you need a 9-5 M-F banking partner though . . . . ?
Posted on 7/28/18 at 6:40 pm to LSURussian
quote:
Each DJ 30 stock is weighted equally.
The DJIA is price weighted, so a 10% move in Boeing will not have the same impact as a 10% move in Pfizer. Unless I’m not understanding you correctly, it seems you are saying the DJIA is equal weighted. Here are the current weightings:
LINK
quote:
A $1 rise or fall in any stock in the DJIA moves the index the same amount.
^^^ That, however, is correct.
This post was edited on 7/28/18 at 6:47 pm
Posted on 7/28/18 at 9:54 pm to NC_Tigah
Sorry to hear you're going through that, NC. I'm not quite sure what "number" you're referring to.
So, you're retiring?
So, you're retiring?
Posted on 7/28/18 at 10:33 pm to LSURussian
quote:Retirement goal, I think.
I'm not quite sure what "number" you're referring to.
Posted on 7/29/18 at 2:05 am to LSURussian
quote:Portfolio target. <3% ROI > Living Expenses.
I'm not quite sure what "number" you're referring to.
quote:Scaling way back, at least for now. Call it a trial run. We'll see if it sticks.
So, you're retiring?
Posted on 7/29/18 at 10:05 am to NC_Tigah
Posted on 7/29/18 at 1:01 pm to NC_Tigah
Not long ago I told my wife I was thinking about retiring. She asked me what I would do every day if I retired.
I said, "Nothing."
She said, "But that's what you did yesterday."
I said, "Yeah, I know, but I didn't finish...."
I said, "Nothing."
She said, "But that's what you did yesterday."
I said, "Yeah, I know, but I didn't finish...."
Posted on 7/29/18 at 2:54 pm to LSURussian
quote:
Not long ago I told my wife I was thinking about retiring. She asked me what I would do every day if I retired.
I said, "Nothing."
She said, "But that's what you did yesterday."
I said, "Yeah, I know, but I didn't finish...."
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