Let’s be honest, the stock market can seem like a foreign language to most of us and also can be very boring to learn about. I’m sure a lot of us have heard the words “Dow” and “plummeting” being thrown around over the past few weeks and have no clue what that means, except for the fact that it probably isn’t a good thing. I’m going to break down the Dow, explain what has happened to it and why we should care, even if we may not be involved in the stock market.
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What is the Dow?
The Dow, also known as the Dow Jones Average Industrial Index, is an index in the stock market that tells traders how a collection of 30 large publicly owned companies in the US stock market are doing between trading hours (9:30 AM – 4:00 PM). It is typically an indication of how the market is doing and if a news source says that “the markets are up today,” they are typically referring to how the Dow is doing that day. A few of the most recognisable companies that are part of the Dow are Wal-Mart, Coca-Cola, Nike, Apple, and McDonalds.
What has happened to the Dow over the last few weeks?
Last week, the Dow experienced its worst week in two years. The index decreased 5.2 percent last week, which was the Dow’s biggest one week pullback since January 2016. This all follows record high numbers for the Dow that have surged over the past year. Because of these steep drops, traders began to freak out. Twice last week, the Dow closed more than 1,000 points lower than it had opened at for the day. That’s a lot of points to drop in one day!
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Why should we care?
Over the past month, the Dow has hit record highs and then drastically dropped last week. On January 28th, the Dow hit a record high of 26,616.71. Last week, the Dow dropped to 23,860.476. For those who don’t understand what this number is, this is a very drastic drop in a short period of time. This shows volatility in the market, which isn’t always a good thing. Basically, a lot of investors could lose a lot of money really fast. Because of the low volatility over the past year, these lows have come as a huge shock to the market. Now, investors are expecting many more waves in the Dow as the year goes on. So why should we care? The Dow can indicate how the markets are doing, so if it is volatile, people can lose a lot of money.
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