Courtney Myers Blog | Can We Predict DJIA Performance in 2019? A Look at Its Possible Paths | Talkmarkets

Can We Predict DJIA Performance in 2019? A Look at Its Possible Paths

Date: Thursday, January 10, 2019 10:31 PM EDT

It goes without saying that investing in the stock market comes with its fair share of risks. After all, the market ebbs and flows with such irreverence that what seems promising on Monday could already be on the downswing by Tuesday, with the opposite also holding true. Yet, for all its uncertainty, it historically follows a general trend of gain, an expectation that those just creating their retirement portfolios hope holds true in the future, especially those who select to be among the high-risk, long-term time period.

As such, making solid predictions on the performance of the broader market as a whole is generally an educated guess at best, as low-lying companies can come up from the woodworks and surprise investors with suddenly high prices, while sure favorites can just as easily fall short.

One of the most telling and thoroughly researched metrics is the Dow Jones Industrial Average, or DJIA. Put simply, the DJIA measures the price-weighted averages of 30 major stocks curated from the Nasdaq and the New York Stock Exchange, or NYSE. Invented in 1896 by Charles Dow and named for Dow and his business partner Edward Jones, it’s globally recognized as one of the most prominent indices. It is what most reporters are referring to when they take note of “the market’s” performance that day.

Originally, the index only consisted of 12 industrial companies, including General Electric. Today, the only one remaining from the original lot is GE. Now, it’s comprised of heavy hitters including Walt Disney and Microsoft Corporation among others. It’s calculated by a price-weighted model, meaning that stocks with a higher share price are more prominent. When it was first created, Dow took the prices of the original 12 stocks, then divided that sum by 12 to achieve the average.

For decades, tax planners and financial experts have sought to forecast the DJIA for an entire year’s term. Bearing in mind that conditions are set to change at any given second, there are three predominant schools of thought concerning how the DJIA will fare in 2019. Here are a few directions it could go in.

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