On Tuesday, the front page of the Chicago Sun-Times declared, “Dow’s Historic Drop: 1,175-point plunge—its biggest one-day loss in history—puts the once-roaring 2018 market in the red.” The headline correctly reported how much the blue-chip average fell, but it failed to provide any context.
Monday’s drop put the Dow Jones industrial average and the S&P 500 index about where they were in early December. Was that mentioned in any of the headlines you saw? I’m guessing not. How about today? The large-cap indexes are about where they were on Thanksgiving. Yes, we’ve given up two months of gains, but it’s normal to incur downward price volatility.
You’re likely not hearing this message because point moves are bigger attention grabbers. Monday’s 1,175-point drop was huge on an absolute basis, but not nearly so on a percentage basis. The Dow’s 4.6% loss, while sizeable, didn’t even crack the top 20 in terms of the largest daily percentage declines. During October 2008—in the midst of the financial crisis—the blue-chip average experienced three daily declines of greater than 7%. None of these were records either. The biggest daily drop on a percentage basis remains October 19, 1987 (aka “Black Monday”), when the Dow shed 22.6% of its value.
More on AAII.com
- Stock Market Retreats and Recoveries – Not only is downside volatility normal, but those who bought stocks on every 7% drop would have looked like terrific market timers.
- A Lifetime Investment Strategy – This timeless guide by AAII founder James Cloonan is worth reading anytime you feel nervous about the market.
Highlights from this month’s AAII Journal
- The Individual Investor’s Guide to the Top Mutual Funds 2018 – Our annual mutual fund guide is fully updated. The online version of this guide has information on nearly 1,600 funds.
- Retirement Doesn’t Negatively Impact Health – Two new studies found that retirees have fewer negative health shocks than they expected and experience a decrease in hospitalization rates relative to preretirement.
AAII Sentiment Survey
- Bullish: 37.0%, down 7.7 points
- Neutral: 28%, up 1.5 points
- Bearish: 35%, up 6.3 points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
Take the Sentiment Survey.
What’s Trending on AAII
The Week Ahead
Fourth-quarter earnings season will remain busy with 57 members of the S&P 500 reporting. Included in this group are Dow Jones industrial average components: Cisco Systems Inc. (CSCO) on Wednesday and The Coca-Cola Co. (KO) on Friday. Many smaller companies will also report.
The week’s first economic report will be the January Consumer Price Index (CPI), January retail sales and December business inventories, all released on Wednesday. Thursday will feature the February Philadelphia Federal Reserve’s business outlook survey, the January Producer Price Index (PPI), the February Empire State Manufacturing Survey, January industrial production and the February housing market index. January housing starts and building permits, January import and export prices and the University of Michigan’s preliminary February consumer sentiment survey will be released on Friday.
Only one Federal Reserve official will make a public appearance this week, Cleveland president Loretta Mester on Tuesday.
Local Chapter Meetings
AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you!