Which Stock Market Do You Follow?
The DJIA, S&P 500, Nasdaq, or NYSE?
Imagine you are sitting in your office
and the phone rings. It’s one of your top
clients, and they ask you; “How’s the stock
market doing?”
Maybe your client wants to know how the
stock market is doing right then. Maybe
they are wondering how it has performed
over the past month, quarter, or year. Or
maybe they are asking for your current or
future stock market outlook.
However, this story should not end there. As
the famous Paul Harvey used to say; “And
now…for the rest of the story.”
There is actually another historical, major,
and all-important stock market index. In fact,
this particular index is the oldest, largest,
and most reputable measurement of the
overall stock market.
Which index could this be? The New York
Stock Exchange (NYSE).
In either case, where would you turn for
your answer? Which index do you believe
tells the most accurate story of the overall
stock market?
FACT: The NYSE is, without question, the
single most reputable, meaningful, and
valuable stock market index.
For the last 100 years (particularly the last
50 years), investors and investment
professionals have gauged the stock market
by using:
1. The Dow Jones Industrial Average (DJIA)
2.The Standard and Poor’s 500 Index
(S&P 500)
3. The Nasdaq Composite (Nasdaq)
I have found most people are surprised to
learn the history of the NYSE and how it
compares to the other three benchmarks.
This is especially true when you consider
the fact that the NYSE is:
• Largely overlooked and ignored
• Rarely mentioned or acknowledged
• Extremely hard to find and follow Page 12
The NYSE — Compared to the DJIA,
S&P 500, Nasdaq
As you will see from this exercise, the NYSE
has always been the leading indicator for
the stock market’s overall health and
long-term trend.
The best way to prove this fact is by
comparing and contrasting the NYSE to the
other popular benchmarks.
The Dow Jones Industrial Average (DJIA)
The DJIA was created by Charles Dow,
editor of the Wall Street Journal and
co-founder of Dow Jones & Company.
The “Industrial” part of its name is merely
historical, since very few of today’s DJIA
stocks have anything to do with the
traditional heavy industry.
The DJIA is arguably the most notable
stock market index. For example, when
the media states “the stock market is up
or down today”, they are generally referring
to the DJIA.
The Register | November-December 2016
DJIA key details and characteristics:
• The DJIA was founded in 1896 — dating
back only 120 years.
• The DJIA is the second oldest U.S. stock
market index.
• Commonly referred to as “Dow Jones”,
“Dow 30”, and “Dow”.
• The DJIA began with 12 stocks, which
expanded to 30 in 1928.
• The stocks that make up the DJIA have
changed a total of 51 times.
• The DJIA consists of 30 stocks that are
among the largest publicly-owned stocks
based in the United States.
• Each of the 30 DJIA stocks also trade on
the NYSE.
• The DJIA is a price-weighted index. What
this means is the stocks with the highest
prices are given a greater weight and,
have a greater impact on the index.
The Standard and Poor’s 500 Index
The S&P 500 is often considered the most
accurate gauge of the performance of
large-cap American equities. While the S&P
500 focuses on the large-cap sector of the
market, many consider this index as
representative of the stock market because
it includes a significant portion of the total
value of the market.
Over the past several decades, the S&P 500
has become the preferred index for U.S.
stocks, unseating the DJIA. Since the S&P
500 is made up of 500 stocks (versus 30 in
the DJIA), it is perceived as a bigger,
broader, and better measurement of the
overall stock market.
S&P 500 key details and characteristics:
• The S&P 500 was founded in 1957
— dating back only 59 years.
• The S&P 500 is the second youngest
U.S. stock market index.
• Commonly referred to as the “S&P
Composite” and “S&P”.
• The S&P 500 consists of 500 stocks
selected by the S&P Index Committee, a
team of analysts and economists at
Standard & Poor’s.
• The criteria for stocks to be added to the
S&P 500 include: being a U.S. company,
market capitalization in excess of $4
billion, a public float of at least 50%,
financial viability, adequate liquidity and
reasonable price, sector representation,
and company type.
• The S&P 500 is a market capitalization
weighted index. This means the stocks
with the highest capitalization are given
a greater weighting and, therefore, have
a greater impact on the index. (Note: A
stock’s capitalization is determined by
multiplying the stock’s share price by the
number of shares outstanding.
The Register | November-December 2016
The Nasdaq Composite Index
The Nasdaq is mostly known as the
benchmark index for U.S. technology (and
growth) stocks. Some of the world’s most
notable tech stocks traded on the Nasdaq
include: Facebook, Amazon, Netflix, Google
(commonly referred to as “FANG”),
Microsoft, Intel, and Oracle.
The Nasdaq was created by the National
Association of Securities Dealers (NASD) to
enable investors to trade securities on a
computerized, speedy, and transparent system.
As the technology sector explosively grew
during the 80’s and 90’s, the Nasdaq was
the most followed market index during that
time frame.
Nasdaq key details and characteristics:
• The Nasdaq was founded in 1971
— dating back only 45 years.
• The Nasdaq is the youngest U.S. stock
market index.
• Unlike other major market indexes, the
Nasdaq Composite is world-wide, which
is not limited to just U.S. based
companies.
• The Nasdaq is also known as a global
electronic marketplace to facilitate the
buying and selling of stocks.
• Commonly referred to as the “Nasdaq
Composite Index”.
• The Nasdaq’s computerized trading
system was created to serve as an
alternative to the “specialist” system.
• The Nasdaq consists of approximately
2,500 small, medium, and large-cap
growth stocks.
• Similar to the S&P 500, the Nasdaq is
also a market capitalization weighted
index. Again, this means the stocks with
the highest capitalization are given a
greater weighting and, therefore, have a
greater impact on the index.
The New York Stock Exchange
Since the inception of the stock market, the
NYSE has maintained a set of uniquely
stringent listing requirements. Therefore,
any stocks listed on the NYSE have earned
an inherent “seal of approval”.
NYSE stocks are perceived as more
reputable, credible, and well-established
than the stocks listed on other exchanges.
For many, the NYSE is a symbol of all that is
Wall Street. It is the place where fortunes are
made and lost, and where the free market
can be seen in its most tangible form.
NYSE key details and characteristics:
• The NYSE was founded in 1792
— dating back 224 years.
• T he NYSE is the oldest U.S. stock index.
• The NYSE is the largest world-wide stock
index (in terms of the U.S. and globally).
• The NYSE has the largest and oldest
publicly traded companies.
• The NYSE consists of over 3,000 of the
world’s largest, most reputable, and
heavily-traded stocks.
• Commonly referred to as “The Big
Board” and “NYSE Composite”
• The NYSE ensures an “orderly” market
for the trading of stocks.
• The NYSE is distinguished because its
stocks are traded using an auction
market where brokers and specialists
buy and sell securities for people by
matching the highest bidding price with
the lowest selling price.
• Unlike other exchanges, the NYSE has
an actual trading floor (11 Wall Street in
New York).
Who Actually Follows the NYSE…
and Where?
To illustrate how under-recognized
and allusive the NYSE is, here are two
interesting challenges.
Challenge 1
Ask at least 20 people (family, friends,
investors, clients, fellow investment
professionals, etc.) the following questions:
“How did the stock market do today?”
“Which index do you refer to as the
stock market?”
“How did the NYSE perform today?”
“ Can you tell me the difference between
the NYSE and the other three popular
indexes — DJIA, S&P 500, Nasdaq?”
“Do you regularly follow the NYSE?”
“ If you had to choose one index to follow
the market, would you choose the DJIA,
S&P 500, Nasdaq, or NYSE?”
Once you’ve completed this challenge, how
many people quickly and easily identified
with the NYSE? How many said they really
understand the NYSE? How many claimed
they regularly follow the NYSE? How many
would choose the NYSE as their main stock
market index?
Challenge 2
Search the internet for popular places that
offer stock market performance updates. In
other words, go online and visit the most
widely-recognized websites for quick and
easy access to the stock market, such as;
CNBC, CNN, FOX News, Wall Street Journal,
Money, Bloomberg, Schwab, YAHOO
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Finance, etc. Then, type “stock market
update” into a Google search.
Finally, use your iPhone to ask Siri for a
stock market update — and also check to
see which indices are listed on your iPhone
“stocks” app.
Once you’ve completed this challenge, how
many of these places actually list the NYSE?
How many make the NYSE’s performance
readily and easily accessible? How many
display the NYSE in the same location as
the DJIA, S&P 500, and Nasdaq?
The NYSE Must Be Followed
I sincerely hope this article provides
enough of the necessary facts to reveal
the NYSE’s untold story and unspoken
truth. Even though the NYSE is rarely
talked about in public, and rarely visible
or accessible, we cannot forget this index
is the oldest, largest, most notable
measurement of the stock market. 
Christopher P. Hill, RFC®
Christopher P. Hill, RFC®, is the President
of Wealth and Income Group LLC, with
multiple branch offices in Virginia. Chris
began his 28-year career in the financial
services industry by spending his summers
as a college intern for a major
stockbrokerage firm. After graduating college
with a B.S. in Finance, he spent over a
decade working with the Senior Portfolio
Manager of a leading money management
firm. In 2001 Chris formed his own
company with a primary focus on wealth
management.
Contact: 540.685.4321
[email protected]
www.wealthandincome.com
Securities offered through O.N. Equity Sales Company Member
FINRA/SIPC. Investment Advisory services offered through ON
Investment Management Company.
Page 14
The Register | November-December 2016