Ask anyone how the stock market did today -- or this week, or this year -- and the answer is likely to be couched in terms of the Dow Jones industrial average.
Its been that way for decades and, human nature being what is is, a decade from now the performance of the stock market likely will be measured by the Dow average of 30 big industrial stocks.
That's too bad. In recent years, the Dow Jones averages has not been a good barometer of stocks prices. By almost any method that measures a broad range of stocks, equity prices have done better then the widely used Dow Jones average indicates.
For example, in the weeks immediately following the Federal Reserve Board's new inflation-fighting tight money policy -- announced Oct. 6 -- stocks took a terrible beating. They weren't alone, of course. As markets panicked, interest rates soared and bond prices also declined precipitously.
What has happened since Oct. 6? Well, a look at the Dow Jones index would not encourage anyone interested in buying stocks.
The Dow reached its peak for 1979 on Oct. 5, the day before the Fed announced the new policy. The average closed that Friday at 897.61.
In the turbulent market conditions that followed, the Dow plummeted more than 10 percent to 805.46 on Oct. 25. Since then, recovery has been slow in coming. The average closed today at 835.67, recouping about 33 percent of the ground it lost between Oct. 5 and Oct. 25.
All Dow Jones industrial stocks are listed on the New York Stock Exchange, as are most of the biggest and most widely held equities in the United States.
To be sure, most other Big Board stocks fell sharply as well. The New York Stock Exchange index, which measures the performance of all NYSE-listed stock declined from 63.39 to a low of 56.61 on Oct. 25 -- an even sharper percentage dive than the one recorded by the Dow.
But today, the NYSE index has made up 73 percent of the ground it lost during those terrible three weeks, more than twice the ground recovered by the Dow stocks.
The story told by the Standard and Poor's index of 500 stocks is similar to the one pictured by the NYSE index.It has made up about 75 percent of the loss recorded between Oct. 5 and Oct. 25.
Over on the smaller American Stock Exchange -- heavily dominated by Canadian energy stocks -- not only have prices fully recovered from the October debacle the Amex index set another record today. It closed at 237.32, above the then-record Oct. 5 close of 235.15.
The Amex index had dipped nearly 17 percent between Oct. 5 and Oct. 23, when it hit its low.
"Let's face it, the 30 stocks in the Dow Jones average just aren't where the action is," explained Bert Siegal, director of research at Drexel Burnham Lambert Inc.
"But everybody promotes the Dow index. We do, the newspapers do, the technicians who analyze the market do -- mainly because the index goes back so far that they can use it to complete 70-year trends," Siegal said.
If a guy turned on his car radio on the way home and heard the announcer tell him the Big Board index and the Amex index and didn't hear a word about the Dow, don't you think he'd start flipping channels?" Asked another analyst. "It's like the prime rate. Lots of companies pay rates above the prime and lots pay below it. But the prime rate is something that is easy to fix on."
The Dow index does measure the performance of the biggest and most prestigious of American industrial companies -- stocks that are likely to be in many investors' portfolios. It captures the daily performance of the Exxons, the General Motors, the IBM's and the U.S. Steels.
It is understandable that many small investors would care about the Dow index -- either because they own Dow-type blue chip stock or because their pension funds have a heavy investment in those stocks too.
But the heavy focus on the index is likely to convince many would-be stock purchasers to stick with their corporate bonds -- or their commodities or their goods -- at a time when companies find it difficult to raise new capital-issuing equities because of low equity prices.
No one can make a general case for stock investment over the past 10 years. But once again, the stock market has not been as bad a place to be as the Dow Jones average suggests.
At the end of 1969, the Dow average closed at 800.36. That means in the past 10 years (forgetting about dividends) the average investor would have seen a 4.4 percent increase in the value of his stock holdings -- during a period in which prices have doubled.
Over the same 10 years, the overall NYSE index has risen 20 percent, hardly a hefty gain, but much better than the one recorded by the best-known market index.
Over on the American exchange, where the index has only been kept since the mid-1970s, the index has more than doubled since 1973,
The Dow index is still 200 points below the peak it reached in 1973. when newspaper headlines blared that the Dow had crossed the 1,000-point barrier for the first time in history.
By the way, the Dow closed up 1.97 today.