The Dow Jones is going global

Investing in US shares can give you exposure to some of the world's most attractive economies

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

By all appearances, the Dow Jones Industrial Average (INDEX: ^DJI) is a uniquely American institution. The 30 stocks that make up the index are a "who's who" list of America's largest and most hallowed corporations, from Boeing to Microsoft to Disney. Yet nothing is immune nowadays from globalisation's gravitational pull. Not even the Dow, which has become progressively less a reflection of the American economy than that of the world's.

The Dow goes global
When the index was first created by Charles Dow and Edward Jones in 1896, there was no doubt about its country of origin. All but three of the original 12 stocks had distinctly American names. There was the American Tobacco Company, the Chicago Gas Company, the North American Company, and the United States Rubber Company, to name a few.

Now, only two of its expanded 30 companies are immediately recognisable as such — that is, Bank of America (NYSE: BAC) and American Express. The remainder have names that lend themselves more naturally to global marketing. It's said, for instance, that Coca-Cola's name is the second-most understood term in the world, behind only "OK," and that 94% of the world's population recognise its red and white logo.

Even more telling is the proportion of revenue that the typical Dow company gets from sales in the US. According to quarterly reports and annual filings, the average Dow component derives less than half of its revenue from North America. The majority, or 52%, comes from sales in places like Europe, China, and Brazil.

While the majority of companies fall somewhere in the middle — 13 get between 40% and 50% of their revenue from North America — the list isn't without outliers. On one end of the spectrum are Travelers and Home Depot (NYSE: HD), which get more than 80% of their revenues from North America. And on the other end are ExxonMobilChevron and Intel (Nasdaq: INTC), which look to the US market for less than 30% of theirs.

anImage

Source: Respective companies' annual and quarterly reports. Data for AT&T and Verizon not included.

No company on the Dow demonstrates the global nature of the index better than McDonald's (NYSE: MCD). Despite its origins and association with Uncle Sam, the Big Mac maker gets only 32% of its sales from North America. This isn't even a plurality in terms of continents, as it gets 40% of its revenue from Europe alone. And when you read the company's annual report, let's just say it's all about China, where 1.3 billion hungry customers are waking up to the virtues of American fast food.

You gotta get your mind right!
It should go without saying that there's nothing inherently wrong with the globalisation of the Dow. It's a sign of the times. The world is becoming smaller, commerce more interdependent, and global asset prices — be it stocks, bonds, or commodities — increasingly correlated.

At the same time, however, as a professor of mine from law school liked to remind us: "You gotta get your mind right." In other words, simply recognising that the Dow is transforming into a global index as much as an American one is an important recognition in and of itself, as the index no longer serves as a pure play on the U.S. economy.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by John Maxfield, originally appeared on fool.com

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »