A trillion-dollar swing in the stock market isn’t what it used to be

Stories on the stock market have been full of big numbers lately — especially big down numbers, like the 799 points the Dow dropped Tuesday, the 784 points it fell Thursday (before clawing back more than 700 of them) and the 559 points it fell Friday.

No, I can’t tell you where the market is going — would that I knew. But what I can do is help you put things in perspective. That’s important, because obsessing over big numerical swings (and the endless commentaries purporting to explain why stocks are rising or falling at a given moment) can make you more scared (or more upbeat) than you probably should be.

Let me explain, or try to explain.

In the past two months alone, the Dow has closed at least 500 points higher or lower no fewer than 11 times. On two of those days, the Wilshire 5000 total stock-market index has moved by a once unimaginable $1 trillion. That’s trillion, with a T. That’s how much the Wilshire fell on Tuesday.

But you know what, folks? Swings of 500 Dow points or a trillion dollars of market value ain’t what they used to be. How so? Because the stock market is so much higher than it once was.

Here’s the deal. The first time the Dow Jones industrial average, founded in 1896, had a 500-point move was on Oct. 19, 1987. The Dow’s 508-point drop that day was a terrifying 22.6 percent decline.

At Friday’s market close, such a move would be less than a tenth of that — a tad over 2 percent.

When the Wilshire, founded in 1974, had its first trillion-dollar one-day move on Sept. 29, 2008, its $1.2 trillion loss was an 8.3 percent drop.

These days, that would be about a 3.4 percent drop.

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