There’s a nice headline on MarketWatch today asking “Could you Stomach a 2,600 point drop in the Dow?”, and while at first glance that seems like sheer lunacy – more than tripling the worst daily drop in the Dow (-777 on 9/29/08) – such a move is exactly what happened 24 years ago on what has become known as Black Monday.
The author, Mark Hulbert, correctly(in our opinion) warns readers to be prepared for a similar event at some time in the future, saying that Zipf’s Law predicts such a move will occur in the ‘market’ once every 75 years on average.
But as we like to tell our mothers from time to time when they ask how the ‘market’ did today… which one? There’s more than one market out there, and many, many more if you are involved in a multi-market systematic managed futures program which spans energy, grains, financials, bonds, metals, softs, and more sectors.
This got us to thinking just what a -22.6% move across the board would look like on these different markets, in point terms (ignoring for a moment that many of these markets have limits and could not technically fall this much in a single day – it might take 2 to 4).
As Mr. Hulbert asked… could you stomach a $20 move in Oil? Or a 3000+ pip down move in the Euro? How about over 500 points in the Nasdaq? Down 31 basis points in the 30yr Bonds? Read ‘em and weep below:
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