What would the Dow Look like with Apple It may be by far the most valuable Ameri
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What would the Dow Look like with Apple It may be by far the most valuable American company but Apple Inc still can’t get into at least one exclusive club – the 30-member Dow Jones Industrial Average. That may not be a problem for the company behind the iPhone and the iPad, after all Apple shares recently hit record highs. It is, though, hurting those who tie their investments to the performance of the venerable Dow, which was first calculated in 1896 and is still probably the best-known stock index in the world. Since Apple split its shares seven-for-one last June 6, it’s delivered investors a gain of more than 43 percent including dividend payments, and that has contributed almost one third of the Nasdaq 100’s return of 18.6 percent, according to ETF.com. By comparison, the Dow’s total return has been only 8.97 percent over that period, and it has also underperformed the S&P500 – which does include Apple – and has a 9.56 percent return....Explanation / Answer
The S&P 500 is up 9.56 percent from an intra day low hit on june 6, and the gains since then have been broad. Since that bottom, all but 23 S&P 500 components are higher.
Citigroup on Thursday wrote that the market was "on the edge of euphoria ... causing us to be more cautious," while Goldman Sachs on Wednesday released its 2015 year-end target of 2,100 - just 1.8 percent above current levels.
The recent stretch of solid earnings and economic figures, however, leaves managers puzzled over what could hurt the market going forward.
"It's tough for me to wrap my head around the next big move being lower," said David Lebovitz, global market strategist at J.P. Morgan Funds in New York. "Some people aren't comfortable with current levels, but fundamentals remain strong."
The market's recent gains prompted a notable commentary from the Federal Reserve Bank of San Francisco on Nov. 13 that pointed out certain valuation metrics look stretched. It also noted that the ratio of NYSE margin debt to GDP in September stood at an elevated level that, in the past, was "followed by major downturns in stock prices."
Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management, wasn't buying it. He said the level of margin debt is "more or less consistent with the trend line over the past 20-plus years," though a pullback was possible.
"The primary issue facing the market is that we've gotten a year's return out of the S&P in the past month," he said. "Investors are more than willing to take risk off the table after such a big run."
Volatility may pick up next week as many take off for Thanksgiving. Markets are closed on Thursday and will close early on Friday.
However, December has historically been the best month of the year for the S&P, according to the Stock Trader's Almanac, averaging a rise of 1.7 percent.
Energy names have jumped sharply since the October low, which could make them liable to profit taking, especially going into the Organization of the Petroleum Exporting Countries' Nov. 27 meeting, when members will consider whether to cut output to shore up prices.
Chesapeake Energy, Newfield Exploration, CONSOL Energy and Marathon Petroleum Corp have all gained more than 20 percent since the market's October low.
That may not be a problem for the company behind the iPhone and the iPad, after all Apple shares recently hit record highs. It is, though, hurting those who tie their investments to the performance of the venerable Dow, which was first calculated in 1896 and is still probably the best-known stock index in the world.
Since Apple split its shares seven-for-one last June 6, it’s delivered investors a gain of more than 43 percent including dividend payments, and that has contributed almost one third of the Nasdaq 100’s <.NDX> return of 18.6 percent, according to ETF.com. By comparison, the Dow’s total return has been only 8.97 percent over that period, and it has also underperformed the S&P500 – which does include Apple – and has a 9.56 percent return.
Had Apple been substituted for 29 of the 30 Dow components last June, the index would have been higher. The only Dow member that would have had more of a positive influence on the index than Apple is Visa <v.n>. If Apple had replaced a badly lagging stock such as IBM <ibm.n>, which has dropped more than 13 percent since Apple’s split, the Dow would now be about 450 points higher than its Friday close at 18132.70 (and have gained 9.8 percent rather than the 7.1 percent increase it has recorded, without dividends).
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