BusinessWeek Writes: How New Entrants Will Swing the Dow

 

The venerable Dow Jones Industrial Average just announced its biggest rejiggering in some time: booting components Alcoa (AA), Bank of America (BAC), andHewlett-Packard (HPQ) to induct Goldman Sachs (GS), Visa (V), and Nike (NKE)into its elite group of 30. Prepare yourselves for a very different blue-chip index.

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Does this matter? From a trading perspective the answer is most definitely NO. The Dow Jones average will experience no deviation from its original trading pattern due to these changes. It will continue to perform as if there was no change. However, I do want to bring your attention so something interesting.

Please note that we have two huge Finance conglomerates coming into the index (Visa/Goldman Sachs).  What does that mean? It is simply another confirmation that the Financial sector is now the largest sector of the US economy as the % of GDP.

Is that good or bad? Historically speaking that is really bad. If we study history we soon learn that when any given society shifted from production to money shuffling (as the US has done in a big way over the last 2 decades), it always ends badly for the Nation in question. Will this be the case for the US as well? I am afraid so. 

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