The Investment Scientist

Top ten Dow one-day drops and subsequent returns

Posted on: September 30, 2008

President Bush: “This sucker is going down!”

Today the Dow dropped 777 or 6.98%, making it the largest one-day point drop in history.

The ten largest one-day point drops in history of the Dow (before this one) are recorded in the table below, with subsequent one year returns calculated.

rank date close drop % drop 1 yr later 1 yr return
1 9/17/2001 8920.7 -684.81 -7.13% 8380.18 -6.06%
2 4/14/2000 10305.77 -617.78 -5.66% 10126.94 -1.74%
3 10/27/1997 7161.15 -554.26 -7.18% 8432.21 17.75%
4 8/31/1998 7539.07 -512.61 -6.37% 10914.13 44.77%
5 10/19/1987 1738.74 -508 -22.6% 2137.27 22.92%
6 9/15/2008 10917.51 -504.48 -4.42% TBD TBD
7 9/17/2008 10609.66 -449.36 -4.06% TBD TBD
8 3/12/2001 10208.25 -436.37 -4.10% 10632.35 4.15%
9 2/27/2007 12216.24 -416.02 -3.29% 12684.92 3.84%
10 7/19/2002 8019.26 -390.23 -4.64% 9188.15 14.58%

Data source: Yahoo Finance

History seems to suggest guarded optimism but I will let you decide if history is any guide for the situation today. We don’t know what the future will bring, but if we have a globablly diversified all-weather portfolio, we will be fine.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



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