Is The Dow at an All-Time High?
- Posted by TheArmoTrader
- on March 5th, 2013
Is the Dow Jones Industrial Average at an all-time high? The short answer is yes. As you may have heard today, the Dow Jones ($DJIA) hit a new nominal all-time high. However, as the high was being hit, a ton of tweets/posts hit the air on how the Dow, adjusted for inflation, was nowhere near an all-time high. Even worse, we saw links/posts to charts of the Dow, priced in gold. It’s not that these are bad measures, but they were, in my opinion, being used to show that the stock market has not really gained anything “in reality”.
However, this couldn’t be further from the truth. As we know, if you have been holding the Dow Jones Industrial Average (via ETF or some type of fund), you are not only exposed to inflation, but also to dividend payments. These dividends over time add up. So if you are going to adjust the Dow (or any index) for inflation, then you MUST also adjust for dividends (in order to get the total return). You can’t just pick one or the other if you really wan’t to get a sense of how well a certain asset has performed.
(H/T to @FullCarry for the chart)
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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