I would actually say that it IS historic. 4.6% is a huge drop and one that will be remembered by traders. But the selloff seems to have been triggered by the fact that the Fed may move to raise rates significantly which it’s been dying to do forever. It now looks like it probably can without the broader economy falling apart. It’s got a lot of fat in the stock market to give up if need be. We were at 26K.
Of course what we saw today (and the previous few days) is exactly why we shouldn’t have the Federal Reserve politburo setting overall interest rates.
The market went from thinking the Fed was going to raise rates 3 times at .25% each time to thinking the Fed will raise 4 times with maybe one of those moves greater than .25%. In a market that felt too hot this was a good excuse to sell. And that’s what people did.
If foundational interest rates reflected the market instead of the whims of central planners we’d be unlikely to see these kinds of gaps in sentiment and the ensuing chaos.
The Dow Jones industrial average fell by 1,175 points on the stock market today, plunging nearly 1,600 points at session lows. Those were the worst one-day and intraday point losses ever for the blue-chip index, something trumpeted across most financial media.
But in percentage terms — and that’s how you should look at it — the Dow had a very bad day, but hardly historic.
Because the Dow, S&P 500 index and Nasdaq composite have run up so much in the long bull market, comparing today’s point losses to earlier eras isn’t relevant. Percentage changes offer a better comparison.
The Dow’s 4.6% loss on Monday was the worst since August 2011. But it didn’t even crack the top-20 of all-time losses.