The stock market has been in a steep downcline. The Dow Jones Industrial average broke though 8000, then 7500, then 7000. At one point today, it was at 6705.63, a 52-week low.
Today’s low was almost 50% off the 52-week high of 13191.49. A nearly 50% difference between the yearly high and low for the Dow is shocking to all but the biggest doomsday seers.
This steep sell-off has led economic wags, wonks and pundits to muse on their blogs and in their newsletters about how low the market can go. Of course, very few of them actually answer that question, or even hazard a guess. (At least isthisthebottom.com cuts right to the chase.)
Some offer complicated math based on but/if/when/then scenarios, calculating a number based on statistical analysis. The mathematical formulas are all great, interesting stuff. They really are. Statistical analysis is absolutely fascinating.
(Now, if you’re unnerved about the economy or the market and are looking for information that will make you feel secure, please just stop reading right now. If you’re not in the mood for an existential crisis at the moment, really, just click on another link, because here comes the big but.)
But, lest we forget that sentence often seen at the end of a prospectus: “Past performance is not a guarantee of future returns.” You can learn about a security based on analysis of what it has done in the past, but you can never guarantee what it will do in the future. It’s right there in black and white.
So, how low can the Dow go? Well, the only truthful answer is that it can go to zero.
That is not a prediction, but it is an honest answer to the question. Regardless of what it has done in the past, it can go to zero. It can also go to 20000. It can do any damn thing it wants and you don’t know what that will be.
And what is the Dow going to do tomorrow? It will do exactly one of two things — it will go up or it will go down. That is a guarantee. (Sideways is a relative, not absolute direction, and therefore does not count.)
Now, to give you a trifecta of awesome stock advice you should ignore, here is a hot tip for how to make money in a bear or bull stock market. Sell subscription-based newsletters full of stock predictions.
If you don’t like anything you’ve read here, please don’t get mad at us. We told you to stop reading and it is not our fault that nature abhors a vacuum.
