The Dow This Year

Charlie McGill
Mr. Roddy
GPHC
4/21/2020

Evaluating the Dow's Performance in the Past Year

The Dow is one of the major stock market indexes that measures the performance of 30 large corporations in the New York Stock Exchange. For a comprehensive estimate of total market performance, the Dow is one of the best indicators. 

In the past year, the Dow has seen a drop in the value of the stock market from 26,511 points in late April of 2019 to 23,130 points currently. Unlike in previous years of poor performance, this recession has been caused by a natural phenomenon, not the market or fraud. From April 2019 until late February 2020, the Dow was seeing a consistent increase in value at a higher percentage than usual. When Covid-19 hit in early March, however, the Dow began to collapse. March 9th, 12th, and 16th all broke the record for largest point drops in Dow Jones history, and while the percentage drops weren't as concerning, they were still a disastrous 7.79%, 9.99%, and 12.93%, respectively. The emergence of the coronavirus had thrown the United States stock market into disarray, potentially impacting the retirement funds of millions of Americans and the stock portfolios of the wealthy ones. Recently, the market has recovered slightly thanks to financial aid from the CARES Act and confidence among investors that the economy will reopen soon. However, there is still uncertainty surrounding the future of the Dow and NYSE, which makes it difficult to estimate the future of the stock market. 

That being said, I will attempt to. Before I do, it is important to understand the difference between the stock market and the actual economy. As an example, last week 16 million Americans lost their jobs,  but the Dow had its best day since the 30's and steady growth. This leads me to believe that although coronavirus will likely affect those on Main Street for months or years to come, Wall Street will recover quickly. This is for a two reasons, the first of which is the federal funding going to large corporations. In the CARES Act, Congress sent $500 billion to the Federal Reserve, who will turn it into roughly $4 trillion before dispensing the funds to corporations. Since corporations make up the Dow, this will undoubtedly lead to growth and positive figures. The second reason the Dow will recover quickly is because of the coming reopening of the economy. If done correctly, opening the economy will lead to more business and therefore gains in the Dow. An argument can be held as to whether or not small businesses and individuals will see the same economic growth, and as the whether or not the cost in lives is worth it, but regardless Wall Street will profit. 

I think that coronavirus, and particularly the CARES Act, will lead to further concentration of wealth in the upper echelon of America. I want to focus on the concept of justice when addressing this. How is it fair that corporations get $4 trillion in aid while small businesses get $350 billion (plus an additional $370 billion in a bill likely to be passed today)? How is it fair that corporations get $4 trillion when each American is only getting a one-time $1,200 check? Quite simply, it is not, and the injustice of this situation reflects 40 years of a one-sided relationship between corporations and consumers. I am worried that the CARES Act will only make the balance of power in this relationship worse; since while corporations are able to stay on their feet, many small business are being forced to close (their loan money is rapidly running out). Unfortunately for consumers, this will further concentrate many oligopolistic industries and lead to less competition and higher prices. Whether or not this injustice will continue is up in the air, but unless something is done America will continue to see larger and larger corporations.