Given the recent market volatility and the absurd focus on Dow Jones price drops, I thought it would be important to look at actual data following large single day market declines. It is human nature to get emotional about loss and furthermore very easy to extrapolate those emotions of fear well into the future–Investors need to fight this urge. Quite frequently, commentators march on TV and talk about how it FEELS like the market is turning over. How it FEELS like this is the beginning of a bear market. Or how it FEELS like the good times are over. My view is that feelings are for Valentine’s Day, and when it comes to making investment decisions stick with the data.
See the table below to see single day prices declines of broad-market U.S. stocks and the subsequent returns:
Source: Dimensional Fund Advisors
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