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Ever notice your pulse racing when you hear that the Dow Jones Industrial Average has moved 100 points? It seems like something important, something big, is happening in the market, especially if the move is down. That was once true: A generation ago, when the current 35-year bull market began, the Dow Jones was around 2200. So a 100-point change indicated the market moved over 4.5%. That was a big move.
Even more recently, in 2010, with the Dow trading at about 10000, a 100-point move meant the market jumped (or fell) 1%. Not quite the jolt it was in 1982, but still worth noticing. Today, however, with the Dow Jones Industrial Average at 22300 (over 10-times its level a generation ago), a 100-point move is mostly noise, indicating only a 0.45% change. To help bring this into perspective: in 1987, the stock market crashed by 22.6% when it fell 508 points in a single day. Today, a 508-point move would be about 2.3%—a sizeable move, certainly, but hardly what anyone would call a crash.
With the stock market’s volatility at record lows, it’s easy to forget how common a 100-point move actually is. This year, the Dow Jones has had over 30 days with 100-point moves. And that is among the fewest in five years, even with the declining impact as the market continues its upward climb. So when you hear the media get excited about a 100-point move in the Dow, remember what this really means—that the media is trying to get your attention, not necessarily that anything important is going on in the market.