January 3, 2014

Dow Sizzled in 2013

The blistering performance included positive contributions from all industry sectors, according to S&P Dow Jones Indices

Click to enlarge: Dow Jones Industrial Average, 2013 Performance. Source: S&P Dow Jones IndicesThe Dow Jones industrial average had a great 2013 — gaining roughly 3,475 points or 26.50%. This was the best annual percentage gain since 1995 and the largest point gain in the history of the index, according to an analysis by S&P Dow Jones Indices.

“For only the second time in the past 20 years, the annual close was also the yearly high,” explained Jamie Farmer, a managing director with S&P Dow Jones Indices, in the report released Thursday. (The Dow ended 2013 at 16,576.66.)

“Over the past 20 years, the annual close is, on average, about 6% off of the yearly high — in only four instances has that not been the case,” Farmer said. “The financial crisis of 2008 inflicted the most damage and left the close nearly 33 from that year’s high.”

The better news may be its longer-term performance. After declining 33.8% in 2008, the Dow had a five-year jump of 88.9%.

Even with the results of the recent recession, the Dow’s 10-year total performance was 58.6%, and it rose 33% in seven years.

Breaking It Down

What were some of the main sources of the Dow’s strong showing?

Overall, every industry contributed to the Dow’s blistering 2013 performance. (In 2012, technology and basic materials had a negative impact).

The best-performing sector was industrials, which added about 1,070 points. Financials contributed more than 700 points, and consumer services added 485.

The lower-performing industries included telecommunications, which added just 53 points, and technology, which gained 165.

As for the 30 individual stocks that make up the Dow, Boeing (BA) soared above the other components. It contributed 444 points, or 12.8%, of the DJIA’s advance. This performance came despite problems with batteries in its 787 Dreamliner.

IBM was the worst performer, and during the year, Hewlett Packard (HPQ), Bank of America (BAC) and Alcoa (AA) were removed from the index.

Coming into the index in September were Goldman Sachs (GS), Visa (V) and Nike (NKE). All component companies paid dividends last year, with Exxon (XOM) paying out nearly $11 billion to shareholders.

The index had realized volatility of 9.40, according to S&P Dow Jones Indices. That was a post-financial crisis low. It’s also above the 20-year average of 13.5.

Though the DJIA ended the year up 153% from its March 2009 “financial-crisis low,” past performance does not guarantee future results, of course, as the report concludes.

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