“The Dow Jones Industrial Average has been increasing aggressively all year, and investors see no end in sight. The Dow ETF (DIA) is now over $150 and at an all-time high. Arguably, central banks have started to buy equities, and because they tend to be attracted to safer investments, we could surmise that central bank equity investments are targeting the Dow Jones Industrial Average as well. But are they right to do so?
Historically, the Dow Jones Industrial Average has been comprised of safer equity investments, companies capable of weathering substantial hits to the stock market, but more importantly, companies with business models that have been proven to work over time.
Given what we all have known about the DJIA in the past, and what we know about its composition today, we can still agree that the companies that comprise the index are solid companies that are likely to withstand major economic catastrophe, but at a certain point, valuation must come into play. In this specific instance, it is a concern….”
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