January 7, 2009
The worst correction since the beginning of December trimmed values by -3.23 percent for the NASDAQ, -3.0 percent for the S&P500, and -2.72 percent for the DJIA. Losses deeper than minus two percent are not common, and since 1950, occurred only 25 times in the month of January. Moreover, there are just two times when such losses exceeded three percent in January. Notably, these were part of the declines of 2000 and of 1988.
Last year, January posted three drops deeper than minus two percent. For those who feel that the first month is a useful predictor of what is to come for the balance of the year, those declines seemed a strong forecast of how values were slashed in 2008.
Scanning over the 25 January drops exceeding minus two percent, the one fact that stands out is that most of those incidents came when the markets were in decline. For example, in the 1980-1990 decade, with nine such losing days, six came when prices were falling.
DJIA -2.72 percent
NASDAQ 3.23 percent
S&P500 -3.00 percent