It looks like effectively we have a memory span of about two weeks... I don't want to sound like I'm making fun of others, because this definitely applies to me
After a drop of about 12% over four days there is widespread anxiety, strong enough that people in this forum are posting saying they are seriously considering or have actually made major changes in their asset allocation (e.g. to 100% cash) on the basis of it. Then, after about two weeks of relative stability, everyone more or less calms down and accepts 16,500 as a new level for the Dow. Whew, glad that's over.
I think "whew, glad that's over" is the most general feeling. As at any time, there are going to be plenty of people--more than usual--saying calm before the storm, eye of the hurricane, you ain't seen nothin' yet, etc. etc.
It's perfectly reasonable to feel spooked by
the speed of the fall, which was
unusual. After all, if a fall of 12% in four days were to continue at that rate for two weeks, well, you can do the math.
And it is not necessarily reassuring
to note that single-day drops of 1% happen all the time, and 2% isn't rare... or that on a time scale of a few months, ups and downs of around 7% are par for the course:
Just because this kind of drop is fairly common doesn't mean that it's not the start of a crash. But if you interpret this kind of drop as "the start of a crash" and you act on it
, you are going to be acting on a lot of false alarms, and acting on false alarms is expensive.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.