8 August 2011: Downgrade Monday: Dow falls 634 points
In the first trading session after S&P cut the US credit rating, the Dow plunged about 634 points, more than 5 percent. Bank stocks were hit especially hard, and gold surged to new records. Yet the US Treasuries that had just been downgraded rallied. The panic was intense but brief: within months stocks recovered, and the following years delivered one of the strongest bull runs in history.
The lesson: Selling in a panic locks in losses that patient investors often see recovered within months.
What it meant for investors
$1,000 in S&P 500 index fund at the start of 2012 → $5,312 today, vs $5,312 in the S&P 500.
We start the clock at the start of 2012, the first year in our price data after the event. That is 5.3 times the money, but $0 less than a plain index fund made over the same years.
What S&P 500 index fund teaches: Owning the whole market removes the risk of picking the wrong company but not the risk of a lost decade, so time horizon matters as much as diversification.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2012 | $1,280 | $5,312 | $5,312 |
| 2015 | $2,060 | $3,301 | $3,301 |
| 2018 | $2,700 | $2,519 | $2,519 |
green = beat the S&P 500 · red = lost money
What if you bought S&P 500 index fund? Every starting year and the full story →
More S&P 500 index fund history
- 5 February 2018: Volmageddon: the Dow drops 1,175 points
- 19 February 2020: The S&P 500 hits a record before COVID
- 29 February 2020: The US reports its first COVID-19 death
- 3 March 2020: The Fed makes an emergency rate cut
- 6 March 2009: The S&P 500 touches 666
- 9 March 2009: The bear market bottoms
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
Play Sixty-40