DOWn Days

by Bespoke Investment Group

Yesterday's losses on the Dow Jones Industrial Average were the largest in a single day since June of last year, and it left the Index down 6.7% since the peak on January 15th.  The only good news for investors is that a loss of 300 or more points on the Dow has been followed by an up day 8 out of 13 times since the start of the bull market and 57.3% of the time in the full history of the index.  Since the bull market got under way in March of 2009, the average next-day return has been +51 basis points (bps), and the median has been +35 bps on the days following 300+ point declines.  In point terms, that works out to an 80 point gain on the Dow today.  The below table shows each 300 point loss for the Dow since March of '09 and the following day's returns.

One takeaway from all of this is that 300 point days aren't what they used to be!  Between 1987 and 2003 there were 15 losses of 300 or more points.  Since then, there have been 46 including yesterday's trading.  As the Dow has risen over time, the same percentage move is a much higher point total.  A three figure loss used to be an extremely bad day.  Not so much anymore.

 

Copyright © Bespoke Investment Group

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