Dow Jones Industrial Average

Dow Jones Industrial Average

JUNE 30, 2014

Report Card - Second Quarter 2014

At A Glance

Up 1.51%, the Dow Jones Industrial Average finishes in positive territory for the 1st half of 2014.

CONTRIBUTOR Jamie Farmer Managing Director Index Investment Strategy jamie.farmer@

o Up for the Quarter, Up for the Year - The Dow Jones Industrial Average added 368.94 points in the 2nd Quarter (up 2.24% April to June) to finish the period at 16,826.60. That performance helped the DJIA to a mid-year return of 1.51% and overcame the negativity of January through March (when the Average was down .72%). o Leader & Laggard ? Chevron, Caterpillar and Travelers added the most to the DJIA's advance in Q2 while IBM, Visa and JP Morgan took away the most points. o Industry Performance ? As a group, Industrials were the biggest contributor in Q2, while Technology weighed the most on the DJIA. Year to date, Healthcare had the most positive impact. o The Good - The biggest single day point gain ? up 181.03 - was posted on April 9 when the market saw dovish signals in the release of minutes from the Fed's March meeting. o The Bad - The biggest single day point loss ? down 266.96 - was the following day, April 10, as investors took advantage of the previous day's rally to realize gains on technology and other momentum-oriented stocks. o Dividends ? 29 of the 30 DJIA components paid out Q2 dividends. Disney (DIS), which pays out their dividend annually in Q4, was the lone exception. Total dividends paid out were up ~4.5% over Q1 2014. Buybacks for the current DJIA 30 components are the highest for that universe since Q1 2008.

INDEX INVESTMENT STRATEGY

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

Dow Jones Industrial Average ? Q2 2014

Performance Statistics

Long-Term Performance

Q2

YTD

1 Year

3 Year

2.24%

1.51%

12.86%

35.54%

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

5 Year 99.20%

7 Year

10 Year

25.49%

61.24%

June 30, 2014

Historical Annual Performance

2013

2012

2011

2010

2009

26.50%

7.26%

5.53%

11.02%

18.82%

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

2008 -33.84%

2007 6.43%

2006 16.29%

2005 -0.61%

2004 3.15%

Recent Quarterly Performance

Quarter

Close Qtly. Return

Q4 '10

11,577.51

Q1 '11

12,319.73

6.41%

Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12

12,414.34 10,913.38 12,217.56 13,212.04 12,880.09

0.77% -12.09% 11.95%

8.14% -2.51%

Q3 '12

13,437.13

4.32%

Q4 '12

13,104.14

-2.48%

Q1 '13

14,578.54

11.25%

Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14

14,909.60 15,129.67 16,576.66 16,457.66 16,826.60

2.27% 1.48% 9.56% -0.72% 2.24%

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

Who Helped, Who Didn't

o 17 of 30 components provided fuel for the DJIA's year-to-date advance. o In Q1, 12 components added points to the DJIA while 18 detracted. Q2 saw markedly better performance

with 21 components making positive contributions. o Caterpillar (CAT), which added 114.70 points, was the biggest YTD contributor. Johnson & Johnson (JNJ)

and Walt Disney (DIS) round out the Top 3 while adding 83.68 and 59.98 points respectively. o Visa (V) ? taking off 76.87 points ? has weighed the most on the DJIA thus far in 2014. Goldman Sachs (GS),

a fellow Financial stock, and Boeing (BA) took 2nd and 3rd place on the negative point list. o No single stock posted either positive or negative contributions for every month, though as a group the DJIA

30 experienced advanced in 5 of 6 months YTD (with an awful January being the exception).

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Dow Jones Industrial Average ? Q2 2014

June 30, 2014

Point Contribution: By Stock, By Month

SYMBOL

COMPANY

JAN

FEB

CAT

Caterpillar Inc

19.91

19.65

JNJ

Johnson & Johnson

-20.04

23.44

DIS

Walt Disney Co

-24.34

52.66

MRK

Merck & Co Inc

18.75

25.82

UNH

Unitedhealth Group Inc

-19.39

32.05

CVX

Chevron Corp

-85.28

23.76

INTC

Intel Corp

-9.12

1.41

MSFT

Microsoft Corp

2.70

2.95

AXP

American Express Co

-36.67

40.20

MCD

McDonald's Corp

-18.37

6.29

TRV

Travelers Cos Inc

-59.47

16.44

MMM

3M Co

-77.45

42.00

CSCO

Cisco Systems Inc

-3.47

-0.71

UTX

United Technologies Corp

1.41

19.27

KO

Coca-Cola Co

-22.41

2.44

DD

E. I. du Pont de Nemours and Company

-25.43

36.03

T

AT&T Inc

-11.82

-8.93

VZ

Verizon Communications Inc

-7.19

-2.83

XOM

Exxon Mobil Corp

-58.05

26.39

JPM

JP Morgan Chase & Co

-20.04

9.38

PFE

Pfizer Inc

-1.48

10.98

NKE

NIKE Inc B

-37.18

35.00

HD

Home Depot Inc

-35.26

33.27

GE

General Electric Co

-18.62

2.18

PG

Procter & Gamble

-30.76

13.10

WMT

Wal-Mart Stores

-25.75

0.13

IBM

Intl Business Machines Corp

-69.94

54.52

BA

Boeing Co

-72.12

23.50

GS

Goldman Sachs Group Inc

-84.38

14.96

V

Visa Inc

-46.56

67.49

TOTAL

-877.82

622.87

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

MAR 15.41 39.24 -4.75 -1.41 30.31 22.99 6.74 17.21 -8.03 18.50 8.09 5.97 3.92 -1.16 2.95 3.08 20.16 -0.06 9.05 24.98 0.06 -28.51 -18.62 2.70 12.46 11.11 47.01 -22.03 -16.70 -64.73

135.95

APR 38.72 19.65 -4.69 11.50 -44.63 42.45 5.65 -3.79 -16.70 21.51 35.19 22.03 4.50 9.57 13.68 1.41 4.05 -5.39 30.38 -30.38 -5.39 -5.84 2.44 6.42 12.52 21.06 25.56 22.67 -25.88 -85.09

123.17

MAY -20.36 1.09 29.99 -4.50 29.48 -17.53 4.05 3.47 26.14 0.32 18.43 22.22 9.70 -13.55 0.77 12.78 -1.48 20.74 -12.07 -2.63 -10.60 25.43 4.62 -0.64 -11.30 -18.88 -77.77 40.01 -0.06 78.48 136.34

JUN 41.36 20.29 11.11 -0.06 13.61 49.83 22.99 4.88 21.64 -4.43 3.98 4.43 1.48 -4.94 9.31 -24.85 -0.71 -6.61 0.96 13.17 0.32 4.11 4.69 -3.28 -14.13 -10.92 -19.84 -51.50 49.00 -26.46

109.43

Q1 54.97 42.64 23.57 43.16 42.96 -38.53 -0.96 22.86 -4.50 6.42 -34.94 -29.48 -0.26 19.52 -17.02 13.68 -0.58 -10.08 -22.61 14.32 9.57 -30.70 -20.61 -13.74 -5.20 -14.51 31.60 -70.64 -86.12 -43.80

-119.00

Q2 59.72 41.04 36.41 6.94 -1.54 74.75 32.69 4.56 31.08 17.40 57.60 48.68 15.67 -8.93 23.76 -10.66 1.86 8.73 19.27 -19.84 -15.67 23.70 11.75 2.50 -12.91 -8.73 -72.05 11.17 23.05 -33.07

368.94

YTD 114.70 83.68 59.98 50.09 41.42 36.22 31.72 27.42 26.59 23.83 22.67 19.20 15.41 10.60 6.74 3.02 1.28 -1.35 -3.34 -5.52 -6.10 -7.00 -8.86 -11.24 -18.11 -23.25 -40.46 -59.47 -63.06 -76.87 249.94

Point Contribution: By Industry

o Year to date, 6 of 9 DJIA industries have made positive point contributions. o The Healthcare Industry has contributed the most to the DJIA's advance, adding nearly 170 points (or ~68%

of the total point gain for the year). Industrials and Consumer Services round out the Top 3. o Financials had the most negative year-to-date impact. Consumer Goods and Telecom were the only other

industries to take points off from January to June (though Telecom had a negligible impact). o 6 industries made positive contributions in Q2 after detracting from the DJIA in the Q1, while 2 went from

positive to negative impact over the same period. Only 1 industry ? Healthcare ? provided gains in both Q1 and Q2.

INDUSTRY

JAN

FEB

MAR

Health Care

-22.16

92.28

68.20

Industrials

-146.87

106.60

0.90

Consumer Services

-103.71

92.35

6.23

Technology

-79.82

58.18

74.88

Oil & Gas

-143.34

50.16

32.05

Basic Materials

-25.43

36.03

3.08

Telecommunications

-19.01

-11.75

20.10

Consumer Goods

-90.36

50.54

-13.10

Financials

-247.12

148.48

-56.38

TOTAL POINTS

-877.82

622.87

135.95

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

APR -18.88 99.41 40.33 31.92 72.82 1.41 -1.35 20.36

-122.85 123.17

MAY 15.48 27.68 16.05 -60.56 -29.61 12.78 19.27 14.90

120.35 136.34

JUN 34.16 -13.94 0.45 9.50 50.80 -24.85 -7.32 -0.71 61.33

109.43

Q1 138.33 -39.37 -5.14 53.24 -61.14 13.68 -10.66 -52.92 -155.03 -119.00

Q2 30.76

113.15 56.83 -19.14 94.02 -10.66 10.60 34.55 58.83

368.94

YTD 169.09 73.79 51.70 34.10 32.88 3.02 -0.06 -18.37 -96.20 249.94

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Dow Jones Industrial Average ? Q2 2014

June 30, 2014

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

Dividends, Buybacks

o 29 of 30 components paid Q2 dividends; Disney (DIS) pays dividends annually in Q4. o Exxon Mobil (XOM), with a total YTD payout of over $5.73 billion, led the list. AT&T ($4.82 billion) and

Microsoft ($4.66 billion) rounded out the top 3. o At over $43.8 billion, Q1 stock buybacks for the current DJIA 30 (the most recent available quarter) were the

highest for that universe since the first quarter of 2008.

Source: S&P Dow Jones Indices. Data as of June 30, 2014 (according to Ex-Dividend date).

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Dow Jones Industrial Average ? Q2 2014

June 30, 2014

Source: S&P Dow Jones Indices. Data as of June 30, 2014.

Comparison of First- and Second-Half Performance

o This is the 4th straight year in which the DJIA closed out June in positive territory. o With over 117 complete years of existence for the DJIA (1897-2013), there have been 77 years of positive

annual return and 40 negative. The average up year return was 19.37%, and the average down year return was -15.26%. o There have been 72 years when the first-half performance was positive with an average return of 11.08% for those first six months (i.e. the first half of 2014 is below average). Of those 72 years, 51 subsequently saw positive performance in the second half as well - the average July to December return for these years was 11.99%. In other words, since the inception of the DJIA, a positive second half follows a positive first half just over 71% of the time, with an average second-half performance not quite 1% better than that of the first half. o In those 21 years when the market fell in the second half following a positive first half, the average return was down 9.38%.

Odds and Ends

o This is the 4th straight year in which the DJIA closed out June in positive territory. o There were 124 trading days in the first half:

o 68 sessions ended up o 55 ended down o 1 unchanged (a rare event) o There was just a single day where the DJIA gained over 200 points (up 227.85 on March 4). o There were 4 days with drops of 200 points or more (the worst was down 326.05 on Feb 3).

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