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Perspective

After an ugly day in the stock market Thursday, a little perspective may be in order.  On March 9, 2009, the Dow Jones Industrial Average (DJIA) closed at 6,548.  Capitalism as we know it seemed to be in utter collapse.  And yet, less than two years later, the DJIA closed out 2010 at 11,578.  Not many people would have made the bet in March 2009 that the DJIA would have recovered so rapidly.

 

The DJIA closed at 11,384 Thursday.  This constitutes a big drop from its recent highs a couple of months ago.  But it is only about 200 points (or 1.7%) below where it began the year.  The large market swings that we have recently endured exacerbate our sense of fear.  They have not led, however, to significant losses year-to date.  (The broader-based S&P 500 Index is down 3.5% for the year.)

It is not clear whether the turbulence will continue.  Stocks may go down further or they may rebound quickly.  Stocks may continue in a yo-yo pattern.  Stocks may even drift around aimlessly for a while.  Whatever may occur, it is important to note that looking at short-term price swings -- especially troublesome declines -- does not provide the full story


Words of Wisdom

How many times does the end of the world as we know it need to arrive before we realize that it's not the end of the world as we know it.  -- Michael Lewis (author