October is certainly living up to its reputation in 2018, with the U.S. stock markets' three major indexes delivering some rather ghoulish losses on a month-to-date basis.
Through this past Wednesday, Oct. 24, following a 608-point slide for the iconic Dow Jones Industrial Average (DJINDICES:^DJI), an 85-point drop for the broad-based S&P 500 (SNPINDEX:^GSPC), and a 329-point tumble for the tech-heavy Nasdaq Composite (NASDAQINDEX:^IXIC), the Dow, S&P 500, and Nasdaq were off by 7.1%, 8.8%, and 11.7%, respectively, since October began. The move lower places the Nasdaq firmly in correction territory, with the S&P 500 dangling just a few points away from hitting its 37th correction of at least 10% since 1950.
But where do these large drops rank on an all-time point and percentage basis for these three U.S. indexes? Let's take a closer look.
The Dow's largest single-day point and percentage declines
The Dow Jones has been around for more than 122 years, so, as you can imagine, it's had some pretty wild things happen throughout its existence. Among them is the fact that 5 of the 10 largest single-day point declines have occurred this year!
Then again, large point swings are to be expected from an index that's increased in value pretty steadily throughout history. While a 608-point move lower would have felt catastrophic during the height of the Great Recession, it's but a 2.4% downdraft in today's market, which is hardly worth losing sleep over.
By comparison, here are the Dow's 10 largest single-day percentage declines throughout its storied past.
Note that with the exception of October 2008, all of the Dow's single worst days happened either in 1987, during the Great Depression, or perhaps even earlier. As access to information has become easy to obtain (thanks, internet!), wild swings in the market, on a percentage basis at least, are mostly a thing of the past.
The S&P 500's largest single-day point and percentage declines
The broad-based S&P 500, as we know, has been around for approximately 90 years. Over that time, as you'll see below, it's had a triple-digit single-day loss just three times. Of course, each and every one of the 10 major point declines in the S&P 500 has occurred since the turn of this century, as shown below.
However, just as we saw with the Dow's largest single-session percentage declines, many of the S&P 500's worst days on a percentage basis came a long time ago.
With the exception of three substantive percentage losses in 2008, and of course Black Monday in 1987, the other six worst sessions were logged during or shortly after the Great Recession. Access to information has clearly helped reduced volatility for an index that's arguably the most representative of the health of the U.S. economy.
The Nasdaq Composite's largest single-day point and percentage declines
Of the three major indexes, the Nasdaq has the shortest history, having been founded in 1971. But that hasn't stopped the tech-heavy index from showcasing its volatility since the turn of the century. All 10 of the Nasdaq Composite's largest single-session slides have occurred since the beginning of 2000, including, like the Dow, 5 of 10 this year.
Given its recency of introduction, the Nasdaq wasn't around during the Great Depression. This means its 10-largest single-day percentage drops have occurred between October 1987 and the Great Recession.
As you can see, even with the Nasdaq turning in some truly ugly single-day point declines in 2018, none have even come close to breaking into its 10-biggest single-day percentage declines.
I believe the lesson here is that investors have to take into account the long-term appreciation of stock indexes when evaluating what appear to be big market moves. Although the past few weeks have looked volatile on perhaps a year-to-date basis or when looking solely at point moves, they're nothing more than blips over the long run for all three indexes.