What’s Going on with The Stock Market?
Market Watch’s Chuck Jaffe has said that the recent 508-point drop in the Dow Jones Industrial Average is not an accurate measure of the state of the stock market, as it has not been its best measure for several decades.
Since the days leading up to the Black Monday crash of 1987, triple-digit days on the Dow have consistently generated a great deal of attention in the public eye. The 508-point loss that day constituted 22% of an industrial average that started near 2,250. If there is a 508-point loss on Friday, it will be a decline of only 3%.
While the Dow has been useful in the past, it has become an outdated measure of the stock market. Much like stock market experts use the Standard & Poor’s 500 or the Wilshire Total Stock Market Index to represent the market, individual investors should use better measures to determine its state.
Ultimately, Jaffe has stated that the Dow’s continued popularity is due to the fact that it, “…is a celebrity, famous mostly because it’s known and not because it is particularly talented at the skill it purportedly has. To that end, an investor might think of it as the Kardashian sisters of the financial world, and turn it off.”
Michael Rock | News Cult