'40.96→34,000' 125-Year Dow Jones Index... Four Bear Markets in the Past 25 Years

[Asia Economy Reporter Byunghee Park] The Dow Jones Industrial Average (Dow) celebrated its 125th anniversary on the 26th.

The Wall Street Journal (WSJ) recently summarized the 125-year history of the Dow, highlighting one impressive point: the frequency of bear markets has been gradually decreasing. Typically, a decline of more than 10% from the peak is classified as a correction, and a decline of more than 20% is classified as a bear market.

According to WSJ, during the first 25 years after the Dow was created in 1896, there were nine bear markets, but in the most recent 25 years, there have been only four. Despite a series of adverse events such as the dot-com bubble, the global financial crisis triggered by the U.S. housing market collapse, the Eurozone financial crisis, and the COVID-19 pandemic, the stock market has shown strong resilience. The bull market that lasted from 2009 after the 2008 global financial crisis until last year is classified as one of the longest bull markets in history. The strong rebound following the COVID-19 crash last year also indicates that the upward trend in the stock market is becoming stronger.

The closing price of the Dow, first traded on May 26, 1896, was 40.96. The Dow surpassed the 100 mark ten years later in 1906. It broke the 1,000 mark 66 years later in 1972, and surpassed 10,000 in 1999, 27 years after that. On its 125th birthday on the 26th, the closing price was 34,323.05.

According to WSJ, the Dow has risen by an average of 7.69% annually over 125 years. The number of days it closed at an all-time high reached 1,464.

The reason it took an unusually long time to break through from 100 to 1,000 was the Great Depression of 1929. Out of the 125 years, there were 70 years in which the Dow did not close at an all-time high, largely due to the Great Depression, during which no record highs were set from 1930 to 1953.

The highest closing price in 1929 was 381.17 on September 3. After that, the stock price began to plummet, breaking through the 300, 200, and 100 levels in succession. The Dow did not surpass the 1929 all-time high again until November 23, 1954.

Black Monday on October 19, 1987, is recorded as the worst day in history. On that day, the Dow plunged 22.6%. This was nearly twice the decline on March 16 last year, when the Dow fell 12.9% due to COVID-19. The March 16 decline last year remains the second-largest drop in history, following Black Monday.

When the Dow was first created, it consisted of 12 stocks. Except for General Electric (GE), the other 11 companies have already disappeared into history. GE remained the longest-standing representative company in the Dow but was removed in 2018. GE was removed in 1898, briefly re-included the following year, and then removed again, repeating inclusion and removal in its early years. After being re-included in 1907, it remained a component of the Dow for over 100 years.

The oldest company still included is Procter & Gamble (P&G), which was added in 1932. Originally, ExxonMobil, included in 1928, was the oldest company, but it was removed in August last year.

The number of components increased to 20 in 1916 and expanded again to 30 in 1928, which remains the current number. The components have changed with the times. JP Morgan Chase was added in 1991, Walmart in 1997, Microsoft and Intel in 1999, and Apple in 2015.

The Dow was created by Charles Dow, the first editor-in-chief of WSJ, to help WSJ readers understand stock market movements. The Dow Jones is operated by S&P Dow Jones Indices, a joint venture between financial data company S&P Global and exchange operator CME Group.

Since the Dow's inception, 23 U.S. presidents have served, of whom 13 were Republicans.

This content was produced with the assistance of AI translation services.