The Investment Scientist

Since April 2nd, the S&P 500 has dropped by 10.5%; and since its recent peak on February 19, it has fallen by 18.4%. How should we react to such significant market drops?

To answer this question, I want you to imagine that you bought all your clothes from Neiman Marcus and they are hanging (or sitting) in your wardrobe. Now imagine that Neiman Marcus announces an across-the-board 30% discount on all of their clothing items. Would you say “Damn, my clothes are now worthless” and sell them all at a flea market? You probably wouldn’t and might even make a trip to Neiman Marcus to buy a piece or two to add to your wardrobe.