I’m not a big believer in relevance of the Dow Jones Industrial Average as a leading economic indicator, but Cisco’s ascendancy to the 30-company list is certainly significant. Cisco’s addition came at the expense of bankrupt General Motors, which had been on the Dow since 1925. Only General Electric has been on the list longer.
The move means that the Dow Jones is no longer an “industrial average” per se. IT companies now make up a large block on the list, with Cisco joining Microsoft, IBM and HP and Intel. The Dow chooses companies for its list based on their reputation and their ability to generate sustained growth. For a long time, that meant reliable industrial performers like General Electric, 3M and GM. But in the 21st Century, Wall Street has clearly recognized that IT companies may have more potential to deliver wealth to investors than the makers of light bulbs, Scotch tape and pick-up trucks.