Thursday, February 27, 2020

The Dow Makes an Orderly Retreat

Headlines screams we’ve just suffered the worst lost in the Dow EVER. True, only if your measurement is points, which misses the . . .er . . . point.

To compare relative losses what counts is the percentage drop not the number of points. Losing 100 points if the Dow started at 1,000 hurts exactly the same as losing 1,000 points if the Dow is at 10,000.

Given that, how did February 27, 2020 stack up? Not even in the top twenty percentage points lost[i].

I remember very well the worst day for the Dow: October 19, 1987. I was at a Society of Actuaries meeting in Canada. The Dow dropped “only” 508.0 points, but that equaled 22.61% of the index. In a single day. And not only that, but according to a friend of mine, also at the conference, who worked for one of the large investment banks, for much of the day, no one really knew what prices were because trading essentially stopped.

For perspective, the Dow closed its all-time high on February 12, 2020 at 29,551.42. It has dropped 12.81% since that high.

On October 28, 1929, the Dow lost 12.82% in a single day. (That’s the second worst percentage drop for a day.) On October 29, 1929, it dropped another 11.73%, and on November 6, 1929 it peeled off another 9.92%.

Unlike the 1987 sell-off, markets have been orderly. There has been no panic.

If you are still working, think of this as a 12% off sale on your next 401(k) contribution!

If you are retired, consider that on March 9, 2009 the Dow closed around 6547 and we are still up nearly 400% from that date. (Most of which occurred during President Obama’s term, not President Trump’s.)

What will tomorrow bring? I do not know. Another slide is justified by some because supply chains are still being damaged and more companies will report they are lowering their first quarter 2020 earnings estimates .

A dead-cat bounce is proposed by others because they believe the market has not recognized the Fed will soon lower interest rates to offset some of the damage.

A strong buy opportunity is proposed by others who think this virus is just a blip that will make us stronger in the end—and, housing starts are still on the rise with unemployment at all-time lows.

If you’re not against alcohol, I suggest a nice glass of wine, beer, or cocktail to take the edge off.

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James M. Jackson authors the Seamus McCree series. Full of mystery and suspense, these thrillers explore financial crimes, family relationships, and what happens when they mix. False Bottom, the sixth and most recent novel in the series is set in the Boston area. You can sign up for his newsletter and find more information about Jim and his books at

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