Today the Dow Jones closed down 666 points or -2.54%.1 You will hear that this decline is the 3rd or 4th largest point drop of all time but in percentage terms, this does not fall in the top 20 according to the Wall Street Journal.2 While today was a large point decline, the drop is not extraordinary. We expect that the drop may continue Monday as investors stew about “the memo”, rising interest rates and a possible government shutdown next week. None of these are big concerns to us as we see sales and earnings growing for US companies due to the tax cut. In fact, for the last several weeks, we have seen our 1- year target price for the Dow Jones Industrial Average adjust upward 4 times in 4 weeks as analysts increase their estimates for growing earnings due to the recent tax cut.
Declines of 5% have routinely happened three times each year on average going back to 1900 and a 10% decline has happened once each year on average.3 If you panic, you will lose. If you are a client, we have hopefully educated you on the bad investor behaviors that have hindered investors over the years, and I hope that you remembered what I said about bad news and the media. If you have forgotten, I always say “Bad news sells advertising time because the news networks will run the news repeatedly. They know that most people can’t stop watching, and they can cash in with advertisers running more ads. If it bothers you, turn off the TV!”
Our clients are positioned well to take advantage of this decline, and we will have our eye on the ball every minute on Monday, Tuesday and every day. That is our job, and we do it well. Please feel free to email me your questions. I may not get back to you instantly, but I will get back as soon as possible.
Enjoy your weekend and turn off the TV!
- Source: Thomson Reuters
- Source: Wall Street Journal
- American Funds