Worst Day Ever For Stocks?

Will Monday February 5th go down as the worst day ever for stocks? On this day the Dow Jones industrial average lost more than 1,175 points – the worst single-day point drop in its history. But was it really the worst day ever? Investors need some context.

The 1,175 point drop was indeed the biggest single-day point loss the Dow has ever sustained. But let’s remember the Dow has been soaring almost uninterrupted since March 2009 when it bottomed-out at 6,627 points during the global financial crisis. By the end of January 2018 it had reached a record 26,616 points.

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Worst Day Ever for Stocks?

Better to forget about points and focus instead on percentage gains and losses. Taken in this context the headline reads a bit different. The Dow plunged 4.6 percent – its worst day since August 2011. It doesn’t sound nearly as gloomy.

Another way to frame this day is that the stock market has erased its gains from the start of the year. But 2018 is just one month old.

Where does this day rank in terms of largest one-day percentage drops in history? Will it live on in infamy like Black Monday, Black Tuesday, the Flash Crash, or the aftermath of the September 11th attacks?

Nope, not even close.

Biggest Stock Market Losses

If you were thinking Monday’s 4.6 percent drop was a bloodbath then how would you have reacted to one of the top 20 largest daily losses of all time? This wasn’t even a blip on the radar.

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A day like Monday is why it’s important to ignore the daily headlines and stick with your plan. One day’s gains or losses can be highly volatile, but that volatility tends to smooth out over time. Look at any 20-year investment chart and you’ll barely notice the daily losses as the stock market makes its steady march higher.

20-year DJIA Chart

Final Thoughts

What does a one-day drop like this mean for you and your investment goals? Hopefully not much.

I used this worst day ever as an opportunity to make my final $3,000 RRSP contribution for 2017. After all, it has been six-and-a-half years since the stock market has fallen this hard in one day. I figured I’d take advantage of the sale and add to my retirement account.

Related: How to invest when markets are at an all-time high

This is not market timing, mind you. I have no idea whether the market will go up, down, or sideways for the rest of the year. All I know is that I budgeted for an RRSP contribution this month and thought this was as good a time as any to make it.

Daily market gyrations shouldn’t have any effect on your investing plan. If your time horizon is 20+ years away then what the market does today, or how some stock market pundit “feels” about its direction, is irrelevant to your goals.

Tune out the noise. Stick to your plan. Better days are always ahead.

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7 Comments

  1. Loonie Doctor on February 5, 2018 at 7:33 pm

    An excellent article to give perspective. Thanks!

    It has been a while since we have had a little pain in the markets, so the memory fades. A little pain now and then is a good defense mechanism. It stops us from doing stupid stuff that could result in serious injury.

    In real life, I have a highly predictive leading indicator for those kinds of “corrections”. It is the words “Here, hold my beer and watch this…”

  2. Kejn on February 5, 2018 at 7:39 pm

    Very true Robb (and Loonie Doctor), it’s been a while and still won’t change my thoughts for investing. Just hold on or buy if you have the cash. It will come back and does this really affect anything you are holding?
    I’m investing for simplicity so don’t think it will hurt very much.
    P. S. Didn’t I read somewhere that the stock market has gained on average 10% a year?

  3. Ginette on February 5, 2018 at 8:22 pm

    The headlines like to catch our attention. I like how you provided context to ‘the biggest single-day point loss the Dow has ever sustained’ not even ranking in the top 20. There may be more to come still, which we know stepping in, is the nature of the stock market.

  4. pellrider on February 5, 2018 at 8:47 pm

    I can see the market is going down. If you have time and money, this is a great opportunity to buy more stocks.

  5. Matt on February 5, 2018 at 9:51 pm

    I didn’t even give too much attention to what was going on today…I think my accounts only averaged a 2.5% loss and I was too busy at work to worry…long term is the way to go.

  6. mick on February 5, 2018 at 10:30 pm

    my accounts were up today. I have my entire portfolio in microcaps – no exposure to the DOW. My best stock and second largest position VLE was up close to 10% on the day – in at 80 cents.

  7. Dividend Growth Investor on February 6, 2018 at 10:48 am

    Thanks for putting things in perspective Robb. We are back to the record levels we had in December 2017.

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