We may have forgotten what a bumpy ride the stock market can be. The last few days have been a good reminder, with some rather large declines. We'd like to provide some perspective on this.
First, don't let the big numbers get to you. As the market has risen over the last several years, these point numbers mean less and less. It's about the percentages, not the points. Recently the Dow was down 1175 points in a day, which one news outlet labeled as the "worst point decline in history". While this may be true, in percentage terms (4.6%), it is certainly not the worst decline ever.
Five years ago, the Dow was at about 14,000. A drop of 1175 points would have been an 8% decline, almost twice as much as it is today, percentage-wise.
Second, market declines are very normal.
- A 10% decline happens on average, once a year and last occurred in August 2015*
- Although the market is down 10% from its January 26th high, it's still up 19% over the last 12 months.**
- It may also be reassuring to know that the market has always recovered from declines. Although past results don't guarantee future results, remembering that downturns have been temporary may help calm your fears.