Saturday, September 17, 2016

buy the dips?

Tuesday's Wall Street Journal published a nifty little chart, courtesy of LPL Financial, that showed the U.S. stock market's improving powers of recovery. For 70 years, a one-day market decline of at least 2% elicited no visible reaction: On average, the market reacted to the drop by matching its long-term norms for the next one-week, two-week, and one-month periods. Buying after a steep one-day loss was neither a help nor a harm.

That has changed since the bull market started in 2009, in a big way. Since then, a one-day market dip has been followed by an average one-week gain of 1.3%. For one month, the profit is just more than 3%. Annualized, those figures amount to 45% for the one-month period, and double that (90%) for the one-week measure.

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