Dow Theory laid the groundwork for modern market analysis

The Dow Jones Industrial Average was created in 1896

Charles Dow introduced the DJIA on May 26, 1896, as a simple average of 12 industrial stocks. Although it became the nation’s most enduring market index, none of its original companies remain in the Dow today.

The Dow remains a shorthand for America’s economic health

For over a century, the Dow Jones Industrial Average has been one of the most closely watched market barometers. Its rises and falls dominate headlines and politics, shaping how Americans perceive the strength of their economy.

The Dow Jones & Company began as a small news service in 1882

Founded in 1882 by Charles Dow, Edward Jones and Charles Bergstresser, Dow Jones & Company started with hand-delivered market bulletins. Today it’s a global financial news giant, best known for publishing The Wall Street Journal.

Critics argue the Dow no longer reflects the modern economy

With only 30 companies and a price-weighted formula, skeptics say the DJIA underrepresents vast sectors of the market. They claim it is outdated, though its close correlation with the broader S&P 500 keeps it relevant.

The Dow’s price-weighted formula makes stock price matter more than size

Unlike most indices, which weigh companies by market value, the DJIA is price-weighted—meaning higher-priced stocks have more influence on its movements. As a result, a company’s share price matters more than its overall size.

Dow components are chosen by a committee, not a formula

Unlike many indices, the Dow has no strict rules for inclusion. A small committee at S&P Dow Jones Indices uses judgment—favoring companies with strong reputations, steady growth, and broad investor interest.

A stock market timeline

The stock market has come a long way since the 1600s, when the first version of a stock exchange was created in Amsterdam. Mile markers along the way include everything from the Dow Jones Industrial Average's creation in 1896 to the stock market woes during the COVID-19 pandemic in 2020.

The Dow Divisor keeps the index consistent through time

To adjust for stock splits, mergers, and replacements, the DJIA uses a figure called the Dow Divisor. Originally valued around 12 in 1896, and now less than one, it ensures today’s index levels remain comparable with the past.

The Dow Jones Industrial Average is a stock market index

The Dow Jones Industrial Average tracks 30 large U.S. companies from all major U.S. sectors except for utilities and transportation. It's considered a bellwether of the U.S. economy.

In 1999, Microsoft and Intel’s addition signaled the information tech era for the Dow

Microsoft and Intel became the first information technology firms added to the DJIA. Their inclusion marked a turning point—the digital revolution and tech began to drive the American economy.

The Dow now tracks 30 major US companies across various industries

Since 1928, the DJIA has included 30 firms. Today's group spans technology, healthcare, and finance—with Apple, Microsoft, JPMorgan Chase, Pfizer, and Coca-Cola among its most recognized components.

Watch Ray Dalio explain how the economy works

Dalio describes the economy as a machine that runs on three main cycles: productivity growth, the short-term debt cycle, and the long-term debt cycle. Dalio says layering these three cycles on top of each other essentially creates a template for understanding changes in the economy.

Relive the biggest swings in the Dow’s history

From the 1929 crash to the Coronavirus Pandemic in 2020, this piece spotlights five of the most dramatic single-day moves in the Dow’s 125-year history.

See every company in and out of the Dow since 1928

The index has had 30 companies since 1928. See each company’s tenure on the index and what firms were added or replaced by year and industry.

The dot-com stock bubble taught Howard Marks about markets

Annual investment letters from Howard Marks, the billionaire cofounder of top distressed debt shop Oaktree Capital Management, are required reading on Wall Street. The prolific writer and investor explains the distinction between the folly of trying to time the market and the necessity of paying attention to market cycles. The difference makes all the difference in returns.

The Dow Jones Industrial Average vs. the S&P 500: Which one is a better representation of the economy?

The Dow and S&P 500 are both indexes meant to provide a broad representation of the economy. The Dow has 30 companies and is weighted by share price, while the S&P 500 has 500 different companies weighted by market capitalization. Since the indexes are so different, investors don't always agree on which index is a better representation of the economy—though the two move in the same direction more than 90% of the time.

One theory suggests real estate markets follow a predictable 18-year pattern

The theory dictates that real estate markets tend to experience about 14 years of growth, including a mid-cycle dip, then experience four years of decline. Real estate experts in London discuss the theory in an article.

Watch Ray Dalio break down his 'holy grail' investment strategy

As a hedge fund manager, Dalio's investment strategy relies on insulating investments from economic downturns. To do this, Dalio attempts to diversify investments as much as possible while considering the correlation between industries and markets.

The stock market has crashed many times throughout history

Have you ever wondered how long it takes the market to recover after a crash? This chart outlines major stock market dips throughout history and tracks how many days it took for the market to recover.

Even iconic companies can get dropped from the Dow

The Dow’s lineup evolves as the economy changes. General Electric, part of the original 1896 index, was removed in 2018, after 122 years. ExxonMobil, once the world’s largest company, was replaced by Salesforce in 2020.

A hedge funds timeline, from the 1940s onward

Since Alfred Winslow Jones formed the first hedge fund in 1949, traders have rolled out an increasingly complex array of investment strategies. They all aim to beat increasingly efficient markets and/or to provide ample downside protection against sell-offs.

Hear Ray Dalio's principles for navigating a changing world order

Dalio argues that there aren't new events in history, per se, and that people are taken by surprise by events because they just haven't happened in their lifetimes—not because they are actually novel.

Learn why modern scientific patterns have been described as theories rather than laws

After confirming that the accuracy of some laws of physics is limited to certain domains, science became more hesitant to categorize identified mathematical relationships, such as quantum mechanics, as unchanging laws. Instead, these recent, complex frameworks are designated as theories to acknowledge that they are conditional and may be part of a larger, more complete future framework.

The bond market dates back to the 1100s in Venice

In the early 1800s, bonds were used to fund US railroads and canals in Great Britain. “Liberty Bonds” were sold during both World Wars in the 20th century. Learning about the early and modern history of bonds can offer a glimpse into how the modern bond market came to be.

How chaos helps explain why small market corrections can produce major economic instability

Oxford University complex systems professor Doyne Farmer discusses how predictions from many economic models are overly weighted toward simple relationships, such as supply and demand, and external shocks, such as the COVID-19 pandemic. However, real-world macroeconomic systems involve public and private actors interacting, producing feedback loops and cascading effects that resemble the oscillatory behavior seen in chaotic systems.

Hear history nerd Ray Dalio talk about making decisions during times of uncertainty

For Dalio, history is the best teacher. Dalio emphasizes relying on and respecting the past as a framework for the future, so that during unsettling times, people still make good decisions.

Visualizing decades of stock market performance

Stock markets and the indexes that track their biggest companies tend to ebb and flow, with long growth periods punctuated by shorter recessions. Track the 60-year history of one of the most common stock market indexes, the S&P 500, with this data visualization. The chart highlights the long-term durability of markets despite appearance of short-term volatility.

Modern prediction markets—the platforms where people can trade bets that pay out depending on certain event outcomes—started in Iowa in 1988.

Why does the stock market matter?

Open any newspaper, turn on your local TV news station, or listen to a daily business radio segment, and you’re bound to hear about how the stock market is performing. Netflix created a 17-minute (free) explainer that dives deep into the nitty-gritty of how we got here.

A stock index is a group of companies clustered together, often providing a condensed snapshot of a market segment.

Adam Smith’s 'The Wealth of Nations' introduced concepts like division of labor, productivity, and free markets

Published in 1776, "The Wealth of Nations" is an influential economic work that laid the foundation for modern economic theory. Smith argued for limited government intervention and touted the benefits of self-regulating markets.

Ray Dalio started his career as a golf caddy in Long Island

When Dalio was 12 years old, he worked as a golf caddy at the Links Golf Club. That's where he heard about the stock market for the first time and decided to invest in Northeast Airlines—the only stock he knew that was selling for less than $5 a share. Dalio ended up tripling his profit and became fascinated with the stock market—ultimately laying the foundation for his legendary career as a hedge fund manager.

Listen to a podcast episode that outlines 250 years of world trade history.

John Maynard Keynes was one of the most influential economists of the 20th century

Keynes influenced economic thought by arguing that governments should spend to stabilize economies during downturns. His ideas shaped the postwar international order and remain central to modern economic policy debates.

A prediction market was more accurate than most polls about the 2024 US presidential election

The idea that the median estimate of a group can be more accurate than individual expert estimates is called the "wisdom of the crowd," and dates back to the early 1900s. This theory can help explain the perceived value of prediction markets when it comes to polling and more.

A timeline of Wall Street's history

Wall Street's historical timeline starts with Wall Street getting its name in the 1600s and ends with details about the Occupy Wall Street movement in 2011.

A history of stock exchanges, from Venitain merchants to modern day

While the idea of stock exchanges—markets where securities can be bought and sold—is mostly synonymous with Wall Street, the New York Stock Exchange, and other modern markets, places to buy and sell financial instruments have a long history....

The Wall Street Journal: a timeline

The Wall Street Journal got its start as a financial news bulletin for people trading stocks. Since then, it has evolved beyond just financial news. It now ranks among the preeminent global business news sources.