Question

Evaluate the Overall Stock Market Performance Using the Main Indexes:

• Compare and contrast the three major stock market indexes (i.e. Dow Jones Industrial Average, S&P 500, and NASDAQ Composite).
• Graph the performance of indexes from 1996 to present.
• Analyze the trends and explain the major events from 1996.
• Discuss the overall economic outlook and analysts' forecast of the stock market.
• What are the factors that affect how the stock market performs?
• Where do you see the stock market going over the next three months? One year? Three years?

Answer 1

Evaluate the Overall Stock Market Performance Using the Main Indexes:

1. Dow Jones Industrial average ( DJIA) is one of the widely used American index which is composed of 30 US stocks which are the blue chip companies. Majority of the companies on this index are the market leaders and the most heavily traded one in US. NASDAQ composite as the name suggest includes all the companies which are listed in US thus this is a more broader barometer for the economy as a whole. S& P 500 as the name suggest includes the top 500 companies listed on the stock exchange. Combining all stocks on S&P 500 accouts for nearly 75%-80% of the stocks and is considered to be one of the better barometers for the economy as a whole.
2. Graph the performance of indexes from 1996 to present.- Below is the graphical presentation of the yearly performance of the 3 index from 1996 to 2019

Year	S&P 500 Index	NASDAQ Composite Index Yearly Returns	Dow Jones Industrial Average Yearly Returns
1996	20.26%	22.71%	26.01%
1997	31.01%	21.64%	22.64%
1998	26.67%	39.63%	16.10%
1999	19.53%	85.59%	25.22%
2000	-10.14%	-39.29%	-6.18%
2001	-13.04%	-21.05%	-7.10%
2002	-23.37%	-31.53%	-16.76%
2003	26.38%	50.01%	25.32%
2004	8.99%	8.59%	3.15%
2005	3.00%	1.37%	-0.61%
2006	13.62%	9.52%	16.29%
2007	3.53%	9.81%	6.43%
2008	-38.49%	-40.54%	-33.84%
2009	23.45%	43.89%	18.82%
2010	12.78%	16.91%	11.02%
2011	0.00%	-1.80%	5.53%
2012	13.41%	15.91%	7.26%
2013	29.60%	38.32%	26.50%
2014	11.39%	13.40%	7.52%
2015	-0.73%	5.73%	-2.23%
2016	9.54%	7.50%	13.42%
2017	19.42%	28.24%	25.08%
2018	-6.24%	-3.88%	-5.63%
2019	28.88%	35.23%	22.34%

25.22% 25.32% 26.50% 22.349 18.82% 6.01.64-10% 25.08% 11.02% 16.29% 7.26% A52% 13.42% 3.15% 6.43% 5.53% -0.61% 2.23% 5.63% 16. 5.76% -33,84% Dow Jones Industrial Average Yeary Returns NASDAQ Composite Index Yearly Returns S&P 500 Index 966T Z66T 866T 666 Toodt 2003 2004 2005| 2006 Z007 8007 6007 2010 2011 2012 2013 2014 2015 2016 2017 2019

• Dow Jones started in 1866 with 12 companies which are majorly engaged in the industrial activities and over the years the composition has changed. This index usually do not change often since this include the top 30 blue chips from US trading companies majorly from Technology, Health and retail. The index usually changes in case the company is under financial distress following are some of the majort events in Dow jones
  • March 2015, Apple replaced AT & T
  • September 2017, DowDuPont replaced DuPont. (Following the merger of Dow Chemical Company and DuPont)
  • July 2018, Wallgreens Boots Alliance Replaced General Electric
• Nasdaq Composite has more that 3000 companies listed and was established in 1971with 50 companies and at the time of its establishment was the first electronic stock market in the world. Index started with 100 and had major events during the Dot com boom where it crossed 1000. This went to al time high followed by decline during the financial subprime crises in 2007/08
• S& P 500 tracks the performance of top 500 companies in US. It was started in

1926 and have had annual total return of 9.8%

• In 1926, it developed a 90-stock index, computed daily
• In 1941, Poor's Publishing merged with Standard Statistics Company to form Standard & Poor's
• . On March 4, 1957, the index was expanded to its current 500 companies and was renamed the S&P 500
• In 1962, Ultronic Systems became the compiler of the S&P indices including the S&P 500 Stock Composite Index, the 425 Stock Industrial Index, the 50 Stock Utility Index, and the 25 Stock Rail Index.

While companies performance are the major factors that impact the stock market like its earnings , corporate action announcements there are outside influences as well that will affect stocks and the market. These factors include,: economics, politics, natural disasters, man-made disasters and market psychology.

It is expected that US markets will be volatile considering it’s a US election year also considering that there is an ongoing trade war between US and CHINA it is expected markets to be remain bit uncertain and on the down side. Thus political and economic factors will drive the movement across the stock markets.