Dow Jones industrial average is more than a number

Dow Jones industrial average is more than a number

Most Americans may not know much about the Dow Jones industrial average, but they’ve come to view it as an inverse thermometer, aware that the lower the Dow Jones goes, the sicker they feel. And with an estimated seven out of 10 people now holding some type of investment in the stock market, there are a lot of eyes watching that thermometer.

And most of them have recognized that as the numbers have gone down consistently in the 20 months since July 2007, when the Dow was just short of 14,000, their 401Ks and other market-related nest eggs have lost value.

Only one time since the Dow Jones industrial average began its climb from the depths of the Depression (in July 1932, when it was just 41 points) has the market come this close to losing half its value in a single slide. That was in 1937, when the Dow dropped 46 percent. When the market closed Monday at 7,114 — the lowest since April 1997 — the Dow had lost 49 percent of its July 2, 2007, close of 13,895. Tuesday’s rebound to 7,350 would have trimmed he loss to 48 percent.

As this was being written Tuesday, President Barack Obama was preparing to address Congress, which we will discuss in a later editorial. Confidence plays a big part in what the market does from day to day, so we hope that what he says buoys Wall Street.

Complex forces at work

But the market is where it is today through a combination of complex economic factors, including a U.S. recession that some economists see as almost two years old, a global recession that is hitting developed democracies, emerging Third World countries and China, the giant communist-capitalist hybrid. In the United States there has been a fall in GDP, mounting job losses, an enormous loss of wealth in the housing sector, upheaval in financial markets and a dramatic lack of consumer confidence. And that’s the short list.

The Dow Jones numbers only accentuate Wall Street’s volatility. Just last Thursday, the market closed at 7,465, the lowest in six years. By Monday, the close was the lowest in nearly 12 years.

The magic of the market is, of course, that no one knows when it’s stopped dropping, or when it will rise.

Most of us have learned in history class to date the Great Depression from Black Thursday, Oct. 24, 1929, or Black Monday, five days later, but during that tumultuous week, Wall Street bankers and regular Joes only knew it was bad, not how bad. They did not know that the Dow was beginning a three year descent from 381 on Sept. 3, 1929, to 41 on July 8, 1932 — a loss of 89 percent in value.

Nor did they know that the market would begin a jagged five-year climb out of the basement, only to take that second big hit in 1937.

Over the next days, months and even years, Americans will watch the stock market, sometimes taking comfort in its numbers, sometimes losing sleep, never knowing what the next day’s numbers will bring.