The Dow Jones industrial average closed above 20,000 on Wednesday. Staff writer Jordyn Connell talked with Allen Snively, senior lecturer at UNC's Kenan-Flagler Business School, about what that means and its significance.
The Daily Tar Heel: Can you explain what the Dow Jones industrial average is?
Allen Snively: The number itself isn’t all that important. But it’s the change in that number over time that we look at to gauge whether the health of the economy and the expectations of the investors and the consumers are good or bad.
So if the market index, measured by Dow Jones, is going up, we say that the market is growing. That implies good things about the economy and expectations and consumers. If the index is declining it’s just the opposite. We think bad things are happening. Keep in mind the market is where a lot of people’s wealth is stored.
DTH: What does closing above 20,000 mean for our country?
AS: In 2009 the Dow bottomed out at something like 7,000 or so. In the matter of about seven years we have recovered and then some. We’re up three times what we were at the worst part of the financial crisis.
DTH: Is this a milestone for our country or simply arbitrary?
AS: It’s supposed to be a leading indicator about economic growth, consumer confidence, earnings of companies. It’s a forward-looking metric, because the stock prices are based on what people think is going to happen. So if the index is hitting new highs, that’s kind of a positive statement for what people believe about the future.
DTH: Does the Dow Jones indicate a strong economy, or is it more complex than that?