Question

Using the above print out (#2), explain the performance of the three indices for the past 12 months. From your personal perspective, why do you think a particular index performed the way it did?

YAHOO FINANCE Dow Jones Industrial Average (DJIAdd bo w Opun an accoust E TRADE 23,77884 ·247.49(+1.06%} EST Morket Recently Viewed 23,77884 BTG-U.. 4,056.78 151.68 160.00 39.50 ETH-U.. LTC- 15 Trending Tickers 15.0% 292.50 In partnenship with Ghat

Answer 1

DJI is the Dow Jones Industrial Average, IXIC is the NASDAQ composite and GSPC is a price index (and not a total return index).

Looking at the chart provided we can see that IXIC has outperformed DJI and GSPC for most part of the year and it is only towards the last quarter of 2018 (i.e. October 2018 onwards) that IXIC’s performance becomes almost the same as that of DJI and GSPC. IXIC has beaten DJI for most of the year because DJI, which consists of blue chips, remained under pressure most part of 2018 due to weak job reports in USA and also due to geopolitical tensions that existed between USA and North Korea. IXIC also beats GSPC due to the simple reason that GSPC is not a total return index and hence it does not include dividends.

The last quarter of 2018 saw all the three indexes – DJI, IXIC and GSPC – to fall and this was mainly due to the trade tensions that started between USA and China. Many U.S. companies are reliant on China for their global sales and the trade tension can impact their fortunes in the long run.