Market Commentary

The DOW

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This week the DOW dropped from its index General Electric and added Walgreens. It is common for various indexes to change their holdings. Some because stocks are being acquired thus disappear, go bankrupt, or just no longer relevant. In GE’s case it is the relevance that probably played a roll. Our economy is driven by the service sector not manufacturing and if the DOW wants to reflect that more accurately in their index then the change makes sense.

What this means for investors is that all the ETFs and Index Mutual Funds will have to sell General Electric stock and buy Walgreens. It might show up in the stock price in both stocks but it is not going to be a dramatic event for the stock prices as we have seen since the change two days ago. In other words it is not impactful if one holds either stock in their portfolio. Taking the longer view what is impactful is the fundamentals of each company.

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