Dow Rockets. Volumes Plummet.

 

The timing couldn’t have been more apposite: the Dow Jones Industrial Average breached 17,000 for the first time just ahead of the July 4th weekend.

But this landmark didn’t quite trigger fireworks. Investors are becoming used to this key U.S. equity market barometer setting record highs–it’s been doing so steadily since the first quarter of 2013. What’s more, the highs have been hit on steadily shrinking trading volumes.

Smoothing for daily volatility, the number of shares changing hands hasn’t been this low since the late 1990s.  Trading volumes have been on a declining trend since the DJIA hit a post-crisis low in the spring of 2009.

While it’s been consistently true that market drops have been associated with big jumps in volumes, trading volumes remained consistently high between the start of the last decade and the financial crisis. The

boom in share trading tracked the tech andtelecom bubble but then didn't fall back after the bust of 2001.

The decline in share trading during the massive market rally of the past five years looks to be a reversal of the previous trend. So, perhaps it’s not a surprise that the new highs have been less of a cause for celebration on Wall Street than past peaks. Falling turnover tends to mean less revenue for brokers.

Corrections & Amplifications:

All trading volumes shown for the Dow Jones Industrial Average are primary-market volumes. This limitation was not made clear in the original post.

The trends in composite and primary-market volumes were similar during a sample period examined (September 2010 through July 3, 2014), but the numbers of shares traded in the primary market were between one-fifth and one quarter the number traded in composite trading during

that period.  The decline in composite volume was still greater, down 62.9% based on the 20-day moving averages versus a decline of 55.8% in the primary-market volume.