What’s 200 points between friends, anyway?

 

200 point moves in the DJIA are headline-grabbing news items in the popular press. In an effort to entertain, alarm, or soothe, these large, triple-digit moves are used by the media to create the atmosphere of action and drama.  But are 200 point moves really news-worthy?  Here’s a quick look at what a 200 point move (on an absolute basis) looks like compared to the closing value (relative basis) of the Dow for the past number of years:

200points

If you learned your investment rules of thumb and gained your early experience in the 80s, then you may have a very different view of a 200 point move in the Dow.  In 1987, the Black Monday crash erased 508 points and represented over 22% of market value (!).  Today, 508 points represents “just” 3.4% of the Dow value, and 200 points is a fairly modest 1.3% move.  Our finances can trigger emotional reactions, so before you leap into action after a few 200-point days, take a deep breath and look at the relative change in prices, too.  You may find that you are still living in the 80s!