The chart below from this story over at Marketwatch is getting a good deal of attention lately for reasons that should be obvious to even the most casual observer.
It’s important to note, however, that while the path traced out by the two curves is similar, the scale is decidedly not. The current period full scale (on the left) represents an increase of about 45 percent from the lowest value while the right scale is about six times that.
Stated another way, while the 1929 stock market crash traced out above is a decline of almost 50 percent, if the red curve (representing the Dow today) follows the black one down, that would be a loss of less than 25 percent.
That’s still probably a lot more than most stock investors could bare and, once again, it’s worth pointing out the cruel laws of percent change where a 25 percent decline would wipe out all of last year’s 30 percent gain for the Dow – and then another few percentage points.