While much of 2018 has been slow and steady, let’s remember: the Dow Jones Industrial Average slid over ten percent in two weeks, between January 26th and February 8th.  Yes, the drops can happen quickly. The old cliche still works: markets usually climb up the staircase, but take the elevator down.

It does not change our overall outlook.  Five percent drops can happen at any point in time, even without news.

Another point of note: the Dow Jones began the year at 24,922 on January 3rd. It quickly ran up in January to 26,616 and then it dropped 10%. At the moment, it stands at 26,453 – about where it was in January.

Brendan likes to use the term “lumpy” when it comes to market returns, and he’s right.  Most investors want to see their accounts move up in straight, simple lines.  But it does not work that way. In fact, it never works that way.  I’ve seen years where we make all our gains in the last two weeks of the year, I’ve seen years where we make all the gains in January and tread water the rest of the way. And I’ve seen everything in between. You just don’t know.

But what we DO know if you won’t make anything if you decide to move to the sidelines, or don’t want to participate. Because when you are investing in the market, you are (for the most part) betting on America – and betting the future of business in general.

Below is a chart of the members of the Dow Jones Industrial Average around the time I got started as a broker. Take a look at it (as our friend Josh Brown often writes “click to embiggen”).

Dow Jones Members 1985

Although we’re “betting on America” realize that many (21 of 30) companies that made up the Dow Jones in 1985 are no longer on the list.  Or (for that matter) some are no longer even around. Apple was publicly traded back then, but not a member of the Dow Jones like it is today.  Microsoft was not publicly traded until a few months later, in March 1986. There was no Amazon. No Facebook.  Other than IBM, there was not another technology company in the index.

Haha, there wasn’t even a “Verizon” back then, for that matter (it was still called Bell Atlantic and had just been carved out of AT&T the year before)!

Of equal importance, while we’re “betting on America” and betting on the future of business, look at the companies no longer in the Dow Jones.  What kind of commentary does it say about the progress we’ve made – in just thirty-three years?  We’re actually investing in the progress of commerce. 

For example:
Allied-Signal started when five chemical companies merged to form Allied in 1920.  Allied bought Bendix in the eighties, pushing them into aerospace.  Signal was actually an oil and gas company, and even owned Flying Tiger at one point.  Allied and Signal merged in 1985.  They eventually bought Honeywell and changed their name (and stock symbol) to Honeywell (HON).

American Can was one of the largest manufacturers of tin cans.  Yes, tin cans in the Dow Jones Industrial Average.  The company later changed their name to Primerica and were ultimately merged into something today we call Citicorp.   A pretty interesting trip for a tin-can company!

Still a DJIA member, 33 years later:
American Express
Chevron (also acquired Texaco)
DuPont is now DWDP
Exxon
IBM
McDonald’s
Merck
3M (Minnesota Mining and Manufacturing)
United Technologies

Investing in the market is betting on the future, betting on progress. Period.
And that comes with all the bumps and bruises, all the good days and not-so-good days, and all the draw-downs that come with investing.

 

Now Go Talk About It!