Amazon to join the Dow: What has happened during past reshuffles
Amazon (AMZN) is set to replace Walgreens Boots Alliance (WBA) in the Dow Jones Industrial Average (^DJI) starting February 26th. The move from S&P Dow Jones Indices was partly in response to Walmart's (WMT) 3-for-1 stock split and “the evolving nature of the American economy.”
Yahoo Finance Reporter Jared Blikre joins the Live show to put this change from the Dow into historical context and show what the potential move could bring to the market.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
- The Dow industrials getting a new look. Amazon set to join the index and replacing Walgreens Boots Alliance. But it may not all be good news.
Jared Blikre is here with a look at how historical changes to the Dow has affected the average. Jared.
JARED BLIKRE: Josh, we've been here before. And I just want to dial back the clock to 2020. It was August. So it was the first year of the pandemic.
And it was a few months before the presidential election. And Exxon booted from the Dow in replacing it with Salesforce. And there were two other changes as well. I'll get to in a second.
But I just want to show you what has happened in the 873 days trading day since then. You can see Salesforce up a whopping 2.63%, and Exxon up over 160%. So these changes, it's usually not this dramatic.
But a lot of these changes can have implications for the overall market. Dow is the people's index. It might only be 30 stocks, but it goes back to the late 1800s, 1896.
And it is a reference point in the market. And guess what? Dow has not hit 40,000 yet.
But actually, very recently, had the swap not been made. Exxon for CRM there would have hit very recently itself, 40,000. Now, there are two other changes, as I mentioned.
Pfizer was booted for Amgen. And with hindsight here, that was actually the correct decision given this time frame. Although it was not necessarily looking that great in 2021.
And then Honeywell was swapped out for RTX, which is Raytheon Technology. Raytheon up about 50% here Honeywell up 20%. And by the way, Honeywell, this is it's at least second time in the Dow. So sometimes you see a little bit of a circulation here.
But the bottom line is just because a company is kicked out of the Dow, that might actually be a little bit of a bellwether, it might be a little bit of a tailwind for. Just because after a big decision like this, you know it's been a long time in the making, the official reason and the official trip here was actually Walmart splitting its stock.
You might say, well, how does that change things? Well, because of the way-- very old way that the Dow is calculated, a stock split can precipitate other changes in the index. And it gives the opportunity to reconstruct it.
And, in fact, that's what led to that original change in 2020 where we had these three changes. It was Apple. Apple did a stock split.
And because of that, Dow, S&P, they wanted more exposure for tech in the fund. And they put in Salesforce with the result that we would have had higher performance had that not happened.
We'll have to see if something similar happens with Amazon and Walgreens. But we'll have to see in a few years.
