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Dow Averages
Dow Industrial Average Return Rate & 6 Month CD Rate
Dow Industrial Average Return Rate (DJIA) vs. 6 Month CD Rate
 
DJIA Return Rate
Simultaneous Change
DJIA Return Rate
Subsequent Change
1% Rise in 6 Month CD Rate over 1 Year
-3.99%
+0.98%
1% Decline in 6 Month CD Rate over 1 Year
+3.90%
-0.64%
What does the table mean?
It indicates that a 1% 6 Month CD Rate increase over a 12 month period, (from 5% to
6% for example) has typically been accompanied by a 3.99% Dow Industrial Average
Return Rate decline during that year and a 0.98% Dow Industrial Average Return
Rate increase the following year.

It also indicates that a 1% 6 Month CD Rate decline over a 12 month period, (from 5%
to 4% for example) has typically been accompanied by a 3.90% Dow Industrial
Average Return Rate increase during that year and a 0.64% Dow Industrial Average
Return Rate decline the following year.

The center column shows the change in the Dow Industrial Average Return Rate over
12 months, depending on whether the period experienced a rising or falling 6 Month
CD Rate. The right column shows the change in the Dow Industrial Average Return
Rate during the year following an increase or decrease in the 6 Month CD Rate.

The data history in the middle column shows a strong tendency for the two
rates to move inversely to each other during the same time period.

The evidence for using the previous 12 month change in the 6 Month CD
Rate to predict the future direction of the Dow Industrial Average Return
Rate is strong (right column).

Annual rates are shown in the graph and calculations.



How Do I Use This Information?
There are many investment theories that are well publicized in the financial press.
Even though little or no historical data may be offered as evidence for such theories,
many investors use them subconsciously, if not intentionally.

Example Theories: Rising Inflation is bad for the stock market. A booming housing
market is good for the S&P 500 stock index. A falling fed funds rate means that long
term interest rates will fall.

There are many such theories. In this site,  long term investment and economic data
is tested against decades to determine whether a relationship actually exists or not.
This historical correlation provides a vital aid in interpreting the often confusing
behavior of the financial markets. The perspective gained may be the difference
between staying the course or being blown and tossed by every investment theory
that is popular at the moment. What the majority assumes to be true, often is not. In
the final analysis, readers are admonished to follow the evidence, wherever it leads.

This page tests the relationship between the 6 Month CD Rate and the Dow Industrial
Average Return Rate. Suppose you are making a business or investment decision.
Suppose again that the decision hinges on whether the 6 Month CD Rate and the
Dow Industrial Average Return Rate tend to move in the same or opposite directions.
The data, graphs, and analysis above will enlighten you. You'll discover whether they
move with, inversely to, or independently of each other.

Suppose that the 6 Month CD Rate has risen sharply and that you need to know what
direction the Dow Industrial Average Return Rate is headed in the near future. Does
the recent increase in the 6 Month CD Rate provide a clue about the future direction
of the Dow Industrial Average Return Rate? The data history, graph, and analysis
above will show you how the Dow Industrial Average Return Rate has performed after
increases in the 6 Month CD Rate. You'll see if one indicator has been likely to signal
a change in another. This is not intended as a prediction, but merely as a clue to the
future from the annals of history. No man knows the future, unless he has the ability
to control the future.

This site compares data series for interest rates, stock indexes, economic indicators,
currency exchange rates and real estate values. Suppose that you want to see how
the Dow Averages are influenced by interest rates or the value of the dollar. Click one
of the stock index links on the right side of any page. Links to our multi-series graphs
and correlation analysis may be found at the bottom-center of the stock index pages.



Formula for periods with a rising 6 Month CD Rate:
1) Change in the Dow Industrial Average Return Rate DURING periods with a rising 6
Month CD Rate:
The abbreviated formula is: (Dow Industrial Average Return Rate Change / 6 Month
CD Rate Rise) x 1% = Published Rate.

The complete formula is: [(Average change in the Dow Industrial Average Return
Rate over all rolling 12 month periods with a rising 6 Month CD Rate) / (Average Rise
in the 6 Month CD Rate over the same 12 month periods)] x 1% = Published Rate.

2) Change in the Dow Industrial Average Return Rate AFTER a rising 6 Month CD
Rate:
The abbreviated formula is: (Subsequent Dow Industrial Average Return Rate
Change / 6 Month CD Rate Rise) x 1% = Published Rate.

The complete formula is: [(Average change in the Dow Industrial Average Return
Rate during the 12 months following any rolling 12 month base period with a rising 6
Month CD Rate) / (Average Rise in the 6 Month CD Rate over the 12 month base
periods)] x 1% = Published Rate.


Formula for periods with a declining 6 Month CD Rate:
1) Change in the Dow Industrial Average Return Rate DURING periods with a
declining 6 Month CD Rate:
The abbreviated formula is: (Dow Industrial Average Return Rate Change / 6 Month
CD Rate Decline) x -1% = Published Rate.

The complete formula is: [(Average change in the Dow Industrial Average Return
Rate over all rolling 12 month periods with a declining 6 Month CD Rate) / (Average
decline in the 6 Month CD Rate over the same 12 month periods)] x -1% = Published
Rate.

2) Change in the Dow Industrial Average Return Rate AFTER a decreasing 6 Month
CD Rate:
The abbreviated formula is: (Subsequent Dow Industrial Average Return Rate
Change / 6 Month CD Rate Decrease) x -1% = Published Rate.

The complete formula is: [(Average change in the Dow Industrial Average Return
Rate during the 12 months following any rolling 12 month base period with a declining
6 Month CD Rate) / (Average decline in the 6 Month CD Rate over the 12 month base
periods)] x -1% = Published Rate.


Rolling 12 Month Periods Defined:
Overlapping 12 month periods in a monthly data base.

For example:
In the 24 month period included in 2000 - 2001, there are 13 complete rolling 12
month periods. The first is January, 2000 - December, 2000. The second is February,
2000 - January, 2001. The third is March, 2000 - February, 2001 and so on. The last
complete rolling 12 month period in the 2000 - 2001 period is January, 2001 -
December, 2001.
1/50          1/1960            1/1970            1/1980           1/1990             1/2000            1/2010            1/20
The 12 month Dow Industrial Average Return Rate, is shown in gray. The rate is based on the DJIA
monthly close, excluding dividends. DJIA refers to the Dow Jones Industrial Average. The 6 Month CD
Rate is shown in green (average daily rate per month). Other graphs showing two data series are
available. See links at the bottom of each page. See the Stock Index Forecasts links (upper right
corner) for Forecasts and long term charts for the
major Dow Averages (Industrials, Transports,
Utilities and Composite indexes)
.
-40%
40%
30%
20%
10%
0%
-10%
-20%
-30%
7%
5%
4%
3%
2%
1%
0%
6%
6 Month CD Rate
The Dow Jones Industrial Average, is shown above in gray and is measured using the left axis.
The 6 Month CD Rate is shown in black and is measured using the right axis.
Dow Jones Industrial Average
14000
10000
8000
6000
4000
2000
0
12000
1/2000        1/2002               1/2004              1/2006               1/2008               1/2010          1/2012
Multi-Index Chart
TwinCharts.com
More Multi-Index Charts
To see the Dow Jones Industrial Average on a chart with many other indexes like the
Gross National Product, Oil Prices or Unemployment Rates, click
Dow Jones Indicators.
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