Please ensure Javascript is enabled for purposes of website accessibility

Ask a Fool: Is the Stock Market Crashing?

By Matthew Frankel, CFP® - Updated Feb 9, 2018 at 12:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a turbulent week for stocks, but this isn't exactly a crash.

Q: The Down Jones Industrial Average plunged by more than 2,300 points over the past week and stocks have been extremely volatile. Is this the beginning of a stock market crash?

While a crash is loosely defined as a "sudden drop" in stock prices, it's generally much bigger in magnitude than this. For example, on October 19, 1987, when the Dow lost nearly 23% of its value in a single day, that was a crash. The 2008 near-collapse of the U.S. financial system was also a crash.

This is simply a market correction, and so far, a rather mild one at that. A correction is defined as a 10% drop from recent highs, and the Dow is down by 10.4%. It just seems like a major contraction because for the past couple years, the market has essentially gone straight up. We're just not used to seeing big declines anymore.

Additionally, since the market has climbed so high over the past few years, the larger headline numbers make the situation seem worse than it really is. The 1,175-point drop in the Dow on Monday, Feb. 5, was the largest ever. However, from a percentage standpoint, the 4.6% loss it represents doesn't even rank in the top 20.

The point is that this is just a correction, which is part of a normal stock market. Stay calm and keep your eye on your long-term investing goals. From that standpoint, it's like the stock market just went on sale.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.