S&P says that this is the most volatile market in 70 years. It’s true that so far this year the stock market has moved more than 1% each day over half of the time. But the kind of problems that the market is seeing now pale in comparison to some of the markets of the recent past.
For example, in late 1987 we saw some real stresses. The market had gone up almost 40% through August. Then the market turned and gave it all back. In the aftermath of Black Monday, two thirds of the stocks in the S&P500 actually stopped trading. The specialists on the NYSE floor had run out of capital and couldn’t make a book on their stocks.
At the time, we really thought that the market could stop working. That would have been a true financial disaster. It was not uncommon to see daily moves of more than 5%
I know that Business Week needs to sell magazines. But the kind of fear-mongering that such headlines invite is just irresponsible.
Douglas R. Tengdin, CFA
Chief Investment Officer
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