Market Routs

I set out to write a blog about the recent “market correction”, but before I could gather my thoughts it was over…. Let’s look at what happened, and what can be learned…

On or about February 2nd turmoil hit the markets. By February 5th the news media was in a complete panic driven orgy of fear-based reporting. The market was off around 10% from its record high and the world, according to some, was ending.

The word “rout” must’ve been circulated in a memo at NPR because as I drove to and from work everyday the NPR lady who sounds like she has the 2×4 lodged in her throat was using the term repeatedly. Obviously, she really enjoyed saying it.

“The Witches of Rout” by by Marcantonio Raimondi and Agostino Veneziano

Websters defines a rout as “a defeat and a case to retreat in disorder”. I guess a mere 10% drop in the market meant investors had lost the game. We were defeated, selling our portfolios, and retreating from the market with our lives in disarray. Was this really a market rout?

The Return

By February 15, a mere 2 weeks after it started, the market returned to its normal self and within 3% of its all time high. That 3% mark is significant because the market spent all of 2017 within 3% of an all time high. That low window of volatility and constant day-over-day increase has become the “new normal”. I think people forgot what it was like for the market to move around a little bit.

What historic volatility looks like over the past 5 years

Is a volatility window of one year within 3% of all time highs normal? No. Not even close. Is hitting 47 record highs in the course of a year normal? No. Not even close. What IS normal is what happened February 2 thru February 15; however, the media (and now investors) seem too accustomed to the “new normal”  – low volatility and a steady upward trajectory. Nowadays a little bump on the head to our portfolios is presented to the doctor, patient, friends, and family members as a full brain hemorrhage where our patient (our portfolio) have only days to live.

It’s all about the points

When the Dow dropped over 1,175 points on Feb. 4, the press was all over it. Almost every major news outlet was screaming LARGEST POINT DROP IN HISTORY. While this is true it’s important to remember the Dow dropped 1,175 points off of a near record high of 25,520 points. When you do the math that’s a drop of 4.6% which doesn’t even make the top-20 in terms of the largest daily percentage losses (the worst being 22% in 1987).

I for one am pleading for a little sense and sensibility in our reporting and a little perspective in our headlines. A 1,175 point drop just ain’t what it used to be and “points” can’t be translated to a monetary loss the way a “percentage” can.

A Love Letter


Can we please report gain/loss on the stock market in terms of percentages and not irrelevant points? And while we’re at it, can we start using the S&P 500 as our reporting benchmark and not the Dow Jones Industrial Average? It is a much better picture of the overall market and SPY (the ETF tracking the S&P 500) is over 15 times larger than DIA (the ETF tracking the Dow). 


John Q. Investor


The media pushed investors into such a panic that the popular robo-investing sights like Vanguard, Betterment, and Wealthfront crashed as investors scrambled to log on and hit the “sell” button. Why on earth would people do such a thing? Sell???  Sell what??? This is rational and healthy behavior in the market. It’s called volatility, beta, or normal market behavior… Does anyone remember 2016 when stocks started the year with an 11% drawdown? Are you still retreating and in disarray? Still feeling routed?

Sale… One day only!

Any savvy investor will have cash on the sidelines and these savvy investors would be logging into their account not to hit the “sell” button, but the “BUY” button! Late in the day on Feb. 9, AAPL was selling below $151/share. Six days later it sits at $173/share. If you were fearfully clicking the “sell” button you missed a nice little discount where the largest and most profitable company in the world was having a 13% off sale for one day only…

Market “routs” 1945-2016 and their recoveries – from

Even as I write this, the market is coming off its best 5 day run since 2011. Recovery is in the air! The patient is alive! The retreat of defeat has turned around and become a stampede into Wall St. with people carrying cash in hand and wanting stock certificates in return. The NPR lady, however, is not reporting this. Laughably, and I am not making this up, she is still talking about the rout. Lady, the market is up over 2% on the year so far. Can you please regain some perspective?

Your Investment Horizon

If you are investing for the long term, you have an 88% chance of making money across any 10-year rolling time period in the market, starting any month of the year calculated from 1926.  If your timeframe goes out to 20 years you have a 100% chance of making money. A quick 2-week 10% drop in the market? See the chart above to note those usually only take 2 to 4 months to recover from. There is simply nothing to see here. Move along and tune out the noise.

Lessons Learned

Let this recent market “correction” serve as nothing more than a wake-up call. Check your allocations to make sure nothing got out of whak. Maybe a take a gut-check as well to make sure you have the mindset to tolerate short term volatility on the path toward long term goals. Maybe set aside a few dabloons to throw into your favorite index fund the next time the NPR 2×4 lady is crying in panic on the radio and trumpeting a stock market “rout”. When you hear her getting twitchy and talking about a disorderly retreat from Wall St., that’s a strong buy signal!

Thanks for reading!

I work for Apple and I own Apple stock. It is mentioned in this blog merely as an example of recent volatility. I am not recommending you invest in any security mentioned. After doing your own due diligence, you should consider consulting the services of a trusted, fee-based advisor before investing in anything at all. The opinions expressed here are my own and do not represent my employer.

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