When Bears Maul the Dow

It's officially a bear market, folks (in the Dow). Before you panic, it is worth taking a look at the historical data. A -20% decline happens every 3 or 4 years so it is not that unusual. The Dow ETF is DIA.

Since 1900:

• There have been 31, now 32, declines of -20% or more in the Dow (it takes 3 years at 10% returns to get back to even)
• There have been 17 declines of over -30% (4 years to even)
• There have been 10 declines of over -40% (6 years)
• There has been one decline of over -50% (8 years)

Now that the market is down -20% from the highs, the better question is: "How bad is it going to get"?

While not for everyone, a tactical approach certainly looks like the right choice right now (just like it always looks like the wrong choice in bull markets).

Comments

[adan:]

your last sentence, "While not for everyone, a tactical approach certainly looks like the right choice right now (just like it always looks like the wrong choice in bull markets)...." left me wishing you'd elaborate in another article - thanks!

2008 Jun 28 07:11 PM

[messy:]

Very good cite,,,,as CNBC OFTEN FORGETS that what goes up has to come down by the "laws of nature." Years ago I wa told...NEVER BUY STOCKS TILL THE AVERAGE STOCK IS AT P/E OF 14 ON THE S&P 500. We are finally getting there from an avg of 17-20.
messy

2008 Jun 29 06:27 AM

[messy:]

I believe with all our pissing away 12 billion dollars per month, it will take about 6 years to overcome,,,,thus look for a 40% drop which according to this article has happened 10 times.
messy

2008 Jun 29 06:32 AM