With the arresting title “ Dow 36,000 ,” James K. Glassman and Kevin A. Hassett tell us, in the memorable words of Jimmy Durante, “You ain’t seen nothing yet.”

British pension investors are snapping up index funds these days. In the
first half of 1999 local fund manager Legal & General Group PLC reaped the
largest increase in such investment, but the US’ State Street Global Advisors
moved rapidly up to second place behind it.

The author finds numerous factors such as projected earnings or book-to-price go in and out of
favor in the stock market, but nevertheless tend to have persistent and predictable effects on
stocks in the S&P 500 for extended periods.

So institutional assets in index funds alone in the US were $1.6 trillion at year end 1998, after more than doubling from 1995 to 1998. Of the nearly 1500 institutional funds followed by Greenwich Associates, 24.4% of their total assets are invested in passive management strategies. Since the bulk are probably indexed to the Standard & Poor’s 500, that’s similar to a fifth or a quarter of the industry investing with the same money manager.

The following companies were added to the Dow Jones Industrial Average
November

The stocks in the index most widely used by the financial industry are determined by a combination of general guidelines and the human judgment of a nine-person committee.

The year 1999 may have marked an early sign that indexing, and the practice
of buying to exploit a stock’s inclusion in an important index, is becoming a
factor in Japanese equity markets.

Salomon Smith Barney (SSB) has launched what may be one of the first global
indexes intended as an independently created extension of a competing provider’s
index.