PDF 100 Dow Points Aren't What They Used to Be - Edward Jones

100 Dow Points Aren't

What They Used to Be

Kate Warne, Ph.D., CFA ? Investment Strategist

It can be scary when stocks decline. And even normal market volatility can be uncomfortable, especially with large day-to-day stock market moves. The market's increase over time has raised the level of the Dow Jones Industrial Average (Dow), and as a result, 100-point shifts have become more common. That's because 100 points aren't what they used to be.

Let's Crunch the Numbers

For our example, let's use the Dow's milestone of 25,000. At this level, a gain or loss of 100 points would be less than 1% ? it's actually just 0.4%. So expect many days when the Dow gains or loses 100 points or more, and realize it doesn't make much sense to worry. Remember that you'll undoubtedly see more headlines when the Dow drops 100 points than when it rises 100 points.

Looking back, a day when the Dow moved 100 points was a big gain or loss in the 1970s and 1980s. But more recent ly, daily Dow moves frequently have been 100 points or more. Of course, daily fluctuations sometimes pile up, and there's always the possibility of a market pullback.

Converting Dow Points into Percentages

1970s 1980s 1990s 2000s Today*

Average Dow Price

861 1,504 5,298 10,472 25,000

% Decline for 100-point Drop

-11.6% -6.6% -1.9% -1.0% -0.4%

*Assumes Dow at 25,000.

Source: Bloomberg data, Edward Jones calculations.

So let's translate percentages into points: ? A 5% decline would be a drop of about 1,250 points.

? A 10% decline would be a drop of about 2,500 points.

These numbers may sound big, but they are in line with how much stocks have moved up and down in the past. And while unsettling, they're normal and should be expect ed. If you're prepared and not surprised, you're less likely to react in an emotional way.

How Not to React

Falling stock prices can test the nerves of even the most patient investors. But remember that selling is not your only option to limit losses. When you're a long-term investor, the difference between success and failure may be determined by your actions during a stock market decline.

Take a deep breath and remember this advice: Market declines: ? Are normal, frequent and not a reason to sell quality

investments ? Begin and end without warning ? Provide an opportunity to buy quality Investments at

lower prices

While 100 points on the Dow are definitely not what they used to be, we think it is still important to remember that volatility is a normal part of investing. Historically, the stock market drops by 10% about once a year and pulls back by 5% about three times a year.1

Instead of waiting or worrying when the Dow drops 100 points or so, review your portfolio with your financial advisor today. If necessary, rebalance to the appropriate mix of stocks and bonds, and be prepared to consider adding stocks at lower prices to take advantage of such market moves.

Investing in equities involves risks. The value of your shares will fluctuate,



and you may lose principal.

Member SIPC

1 Source: Ned Davis Research. Further distribution prohibited without prior permission.

? 2017 Ned Davis Research, Inc. All rights reserved. Past performance is not a guarantee

of future results. An index is not managed and is unavailable for direct investment.

RES-8107F-A-A1 EXP 30 JUN 2020 ? 2018 EDWARD D. JONES & CO., L.P. ALL RIGHTS RESERVED.

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