Volatility and You
By now, you have probably heard that today was the single largest point drop in stock market history. The media loves to hype up statistics like this without giving you all the facts and math behind the information.
The Dow Jones dropped 1175 points today (February 8th, 2018) ….or 4.6%. The reason this is the largest single-day drop in history is based on the fact the Dow has risen to its highest point ever by a factor of almost 2x. To put this in perspective, today’s point drop would have been 648 points during the 2008 financial crisis and 539 points during the 2000 dot-com bust.
To date, the largest actual drop in the stock market happened in 1987 on Black Monday when the market fell over 22% in one day.
While the current market volatility is definitely attention-grabbing, it is not a reason to run for the hills or start making rash, emotional decisions. The recent market volatility over the past week is far more normal than the steady rise we have experienced over the past 14-15 months (and 8 years for that matter).
As a matter of fact, we saw a 2-week drop in the market of almost 10% during the first few weeks of 2016. These sort of fluctuations are to be expected.
This is why I constantly stress the importance of a balanced, long-term plan that utilizes multiple asset classes that are not directly correlated to one another.
The past week in the stock market has been a gut check for most investors who have grown accustomed to the fair winds we have had in the market.
Over the past 6 months, we have visited with many of you on the inevitability of a stock market correction. While it still remains to be seen if this is it or not, we highly recommend you ask yourself whether you are comfortable with your current risk allocation.
We have strategies
that allow you to protect and minimize risk. This may be a good time for you to explore them further.