March 9, 2020
Biggest Down Day on Record
Over 2,000 Point Dow Drop
NEAR BEAR MARKET FALL
A 1,000 point fall was eye-popping. The over 1,000 point Dow drop in February 27 was also news worthy as the largest daily Dow decline in ever. Today’s fall was double eye-popping as the Dow made history again with a record point loss of 2,013. More significantly, the Dow lost 7.79%, the eleventh worst percent swoon in history.
Here’s the scorecard:
This chart of the Dow below shows how steep the market fall has been. Today’s close for the Dow put it where it was on January 8th of 2019. This is harsh reminder that stocks fall much faster than they rise. One Wall Street maxim is, “Stocks take the stairs up and the elevator down.”
Today’s market slide was shocking but not a surprise since the fall was telegraphed with yesterday’s news on oil prices. The overnight futures showed crude crashing. Oil had collapsed nearly 30% as Saudi Arabia launched an oil price war in the face of Russia’s rejection of OPEC’s proposed production cut.
Today’s fall was extreme, to say the least. There was a sense of panic that was intended to be calmed with the triggering of a market “circuit breaker”. This was in adherence to the “down 7% rule”. After only 5 minutes of trading, the U.S. stock market was shut-down for 15 minutes. It really did not help, as the market closed down below the earlier low.
From the Dow’s high of 29586 on February 12, the Dow has rapidly retreated 19.3%. That is close the 20% required to call it a bear market. Today’s 2,013 point loss was the most ever in one day. As I noted above, the 7.79% decline was severe and the 11th worst in history.
The “Fear Gauge” indicates how much uncertainty is now being priced into the market. The VIX index, which measures volatility and investor fear, soared nearly 30% today! It is has made a vertical move up by nearly 4-fold in a month. With volatility extremely high, historical point losses, abnormally high volume and support lines broken, the market is bearish.
Remember some wisdom from Mr. Warren Buffett: Back in 1987, Mr. Buffett cited what he called two “super-contagious diseases.” These were fear and greed among investors. Buffett said that his goal to deal with these “epidemics” was “to be fearful when others are greedy and to be greedy only when others are fearful.”
Hope this is helpful.
Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account.
John