Dow is down 531 points in a day! Almost 1000 for the month. The Dow Jones Industrial holds the 30 major companies in the US. The highest point of the Dow was $18,351. Today, it trades at $16,459.
There are concerns with the economic growth in China.
The U.S Federal Reserve is planning on raising interest rates.
Oil prices have plunged to under $40 per barrel. This, plus other factors, has created a sell off for U.S. energy stock companies such as Exxon and Chevron. These companies are down 27% and 41% over the past year.
Brazil’s currency received a blow and is down 9% against the USD. Also take into account that other countries in South America and Asia are having the same issues with currency.
After reading all this, I would not blame you for looking at the nearest exit; however, do you know what a 100 point drop represents in a market trading at over $10,000?
As mentioned in the book of Scott West and Mitch Anthony, Storyselling for Financial Advisors, in 1995 there were two 100 point moves.
1996: There were six 100 point movements that reflected almost a 2% change (highest point $6484 – lowest $5117)
1997: There were fifty-two 100 point movements that reflected almost a 1.5% change (highest point $7,756 – lowest $6560)
In today’s market, 500 points reflects a 3% change. (highest point $18,351- lowest $16,950). This is not an alarming number. In the words of West & Anthony, “Only the media should be concerned about 100-200 point moves in the market” and sometimes even more.
This can create an opportunity for an investor, such as you and me, to invest heavily on some companies.
We have previously mentioned the above scenario in our blog post Meet Mr Market.
We must stick to our investing discipline even during tough periods.