People don’t like change, it’s a thing. Make those changes large, sudden, and frequent and you can really put a damper on someone’s day.
This is exactly what the stock market has been doing to investors for the past two weeks.
Since mid-February, 700 point swings in the Dow have become commonplace and the other indices have been just as wild. News headlines of “Biggest one-day drop since financial crisis!” are everywhere trying to convince investors that this time is different and maybe we really do need to be worried.
There is a reason TV networks look at points on the Dow Jones Industrial Average and not percentages on the S&P 500, it’s simply because bigger numbers are scarier. 786 point drop, or 2.94% drop? Which one would you quote if you wanted people to keep watching your show?
As much as the news would have you think that what we’re going through right now is unprecedented, I assure you it most definitely is not. There is real market volatility going on, but not on any scale investors haven’t seen before.
Starting with the “Biggest Drop Since the Financial Crisis” claim, that’s just flat untrue. 2011 saw three one day drops that were worse than what we experienced in February. And we experienced a correction in 2018 that took only two days longer to happen than the most recent one.
Also, looking at the largest 1 day drops in the S&P 500 since 1985, February 27th ranks 31st. None of the other days we’ve experienced the past weeks have been in the top 50 drops of the S&P in the past 35 years.†
Dramatic moves like what the markets have been dealing us make everyone uncomfortable. Afterall, we are people, and people don’t like change. It doesn’t help to be ignorant of changes, but usually, once put in perspective, they don’t seem so bad.