Which Market Do You Follow? The DJIA, S&P 500, , or NYSE?

Imagine you are sitting in your office However, this story should not end there. As The NYSE — Compared to the DJIA, and the phone rings. It’s one of your top the famous Paul Harvey used to say; “And S&P 500, Nasdaq clients, and they ask you; “How’s the stock now…for the rest of the story.” As you will see from this exercise, the NYSE market doing?” has always been the leading indicator for There is actually another historical, major, the ’s overall health and Maybe your client wants to know how the and all-important stock market . In fact, -term trend. stock market is doing right then. Maybe this particular index is the oldest, largest, they are wondering how it has performed and most reputable measurement of the The best way to prove this fact is by over the past month, quarter, or year. Or overall stock market. comparing and contrasting the NYSE to the maybe they are asking for your current or other popular benchmarks. future stock market outlook. Which index could this be? The New York (NYSE). The Dow Jones Industrial Average (DJIA) In either case, where would you turn for The DJIA was created by Charles Dow, your answer? Which index do you believe FACT: The NYSE is, without question, the editor of the Wall Street Journal and tells the most accurate story of the overall single most reputable, meaningful, and co-founder of Dow Jones & Company. stock market? valuable stock market index. The “Industrial” part of its name is merely historical, since very few of today’s DJIA For the last 100 years (particularly the last I have found most people are surprised to have anything to do with the 50 years), and investment learn the history of the NYSE and how it traditional heavy industry. professionals have gauged the stock market compares to the other three benchmarks. by using: This is especially true when you consider The DJIA is arguably the most notable 1. The Dow Jones Industrial Average (DJIA) the fact that the NYSE is: stock market index. For example, when 2. The Standard and Poor’s 500 Index • Largely overlooked and ignored the media states “the stock market is up (S&P 500) • Rarely mentioned or acknowledged or down today”, they are generally referring 3. The Nasdaq Composite (Nasdaq) • Extremely hard to find and follow to the DJIA.

Page 12 The Register | November-December 2016 DJIA key details and characteristics: The Nasdaq Composite Index • The NYSE is the oldest U.S. stock index. • The DJIA was founded in 1896 — dating The Nasdaq is mostly known as the • The NYSE is the largest world-wide stock back only 120 years. benchmark index for U.S. technology (and index (in terms of the U.S. and globally). • The DJIA is the second oldest U.S. stock growth) stocks. Some of the world’s most • The NYSE has the largest and oldest market index. notable tech stocks traded on the Nasdaq publicly traded companies. • Commonly referred to as “Dow Jones”, include: Facebook, Amazon, , Google • The NYSE consists of over 3,000 of the “Dow 30”, and “Dow”. (commonly referred to as “FANG”), world’s largest, most reputable, and • The DJIA began with 12 stocks, which Microsoft, Intel, and Oracle. heavily-traded stocks. expanded to 30 in 1928. • Commonly referred to as “The Big • The stocks that make up the DJIA have The Nasdaq was created by the National Board” and “NYSE Composite” changed a total of 51 times. Association of Securities Dealers (NASD) to • The NYSE ensures an “orderly” market • The DJIA consists of 30 stocks that are enable investors to trade securities on a for the trading of stocks. among the largest publicly-owned stocks computerized, speedy, and transparent system. • The NYSE is distinguished because its based in the United States. stocks are traded using an auction • Each of the 30 DJIA stocks also trade on As the technology sector explosively grew market where brokers and specialists the NYSE. during the 80’s and 90’s, the Nasdaq was buy and sell securities for people by • The DJIA is a price-weighted index. What the most followed market index during that matching the highest bidding price with this means is the stocks with the highest time frame. the lowest selling price. prices are given a greater weight and, • Unlike other exchanges, the NYSE has have a greater impact on the index. Nasdaq key details and characteristics: an actual trading floor (11 Wall Street in • The Nasdaq was founded in 1971 New York). The Standard and Poor’s 500 Index — dating back only 45 years. The S&P 500 is often considered the most • The Nasdaq is the youngest U.S. stock Who Actually Follows the NYSE… accurate gauge of the performance of market index. and Where? large-cap American equities. While the S&P • Unlike other major market indexes, the To illustrate how under-recognized 500 focuses on the large-cap sector of the Nasdaq Composite is world-wide, which and allusive the NYSE is, here are two market, many consider this index as is not limited to just U.S. based interesting challenges. representative of the stock market because companies. it includes a significant portion of the total • The Nasdaq is also known as a global Challenge 1 value of the market. electronic marketplace to facilitate the Ask at least 20 people (family, friends, buying and selling of stocks. investors, clients, fellow investment Over the past several decades, the S&P 500 • Commonly referred to as the “Nasdaq professionals, etc.) the following questions: has become the preferred index for U.S. Composite Index”. “How did the stock market do today?” stocks, unseating the DJIA. Since the S&P • The Nasdaq’s computerized trading 500 is made up of 500 stocks (versus 30 in system was created to serve as an “Which index do you refer to as the the DJIA), it is perceived as a bigger, alternative to the “specialist” system. stock market?” broader, and better measurement of the • The Nasdaq consists of approximately overall stock market. 2,500 small, medium, and large-cap “How did the NYSE perform today?” growth stocks. S&P 500 key details and characteristics: • Similar to the S&P 500, the Nasdaq is “Can you tell me the difference between • The S&P 500 was founded in 1957 also a weighted the NYSE and the other three popular — dating back only 59 years. index. Again, this means the stocks with indexes — DJIA, S&P 500, Nasdaq?” • The S&P 500 is the second youngest the highest capitalization are given a U.S. stock market index. greater weighting and, therefore, have a “Do you regularly follow the NYSE?” • Commonly referred to as the “S&P greater impact on the index. Composite” and “S&P”. “If you had to choose one index to follow • The S&P 500 consists of 500 stocks The the market, would you choose the DJIA, selected by the S&P Index Committee, a Since the inception of the stock market, the S&P 500, Nasdaq, or NYSE?” team of analysts and economists at NYSE has maintained a set of uniquely Standard & Poor’s. stringent requirements. Therefore, Once you’ve completed this challenge, how • The criteria for stocks to be added to the any stocks listed on the NYSE have earned many people quickly and easily identified S&P 500 include: being a U.S. company, an inherent “seal of approval”. with the NYSE? How many said they really market capitalization in excess of $4 understand the NYSE? How many claimed billion, a of at least 50%, NYSE stocks are perceived as more they regularly follow the NYSE? How many financial viability, adequate liquidity and reputable, credible, and well-established would choose the NYSE as their main stock reasonable price, sector representation, than the stocks listed on other exchanges. market index? and company type. • The S&P 500 is a market capitalization For many, the NYSE is a symbol of all that is Challenge 2 weighted index. This means the stocks Wall Street. It is the place where fortunes are Search the internet for popular places that with the highest capitalization are given made and lost, and where the free market offer stock market performance updates. In a greater weighting and, therefore, have can be seen in its most tangible form. other words, go online and visit the most a greater impact on the index. (Note: A widely-recognized websites for quick and stock’s capitalization is determined by NYSE key details and characteristics: easy access to the stock market, such as; multiplying the stock’s share price by the • The NYSE was founded in 1792 CNBC, CNN, FOX News, Wall Street Journal, number of . — dating back 224 years. Money, Bloomberg, Schwab, YAHOO

The Register | November-December 2016 Page 13 Finance, etc. Then, type “stock market update” into a Google search.

Finally, use your iPhone to ask Siri for a stock market update — and also check to see which indices are listed on your iPhone “stocks” app.

Once you’ve completed this challenge, how many of these places actually list the NYSE? How many make the NYSE’s performance readily and easily accessible? How many display the NYSE in the same location as the DJIA, S&P 500, and Nasdaq?

The NYSE Must Be Followed I sincerely hope this article provides enough of the necessary facts to reveal the NYSE’s untold story and unspoken truth. Even though the NYSE is rarely talked about in public, and rarely visible or accessible, we cannot forget this index is the oldest, largest, most notable measurement of the stock market. 

Christopher P. Hill, RFC® Christopher P. Hill, RFC®, is the President of Wealth and Income Group LLC, with multiple branch offices in Virginia. Chris began his 28-year career in the financial services industry by spending his summers as a college intern for a major stockbrokerage firm. After graduating college with a B.S. in Finance, he spent over a decade working with the Senior Portfolio Manager of a leading money management firm. In 2001 Chris formed his own company with a primary focus on wealth management.

Contact: 540.685.4321 [email protected] www.wealthandincome.com

Securities offered through O.N. Equity Sales Company Member FINRA/SIPC. Investment Advisory services offered through ON Company.

Page 14 The Register | November-December 2016