What was the Best Day for the Markets?

Prices on the stock market rise and fall every day, making it a continually shifting entity. However, some days have distinguished themselves as exceptional due to their notable dramatic gains or losses. One such day was October 13, 2008, which continues to be the top trading day in terms of the largest daily point increase in the Dow Jones Industrial Average history. 

The Dow ended that day at 9,387.61, up 936 points, or 11.1%. This resulted in the index, a crucial yardstick for gauging the performance of the US stock market, gaining points for the first time ever in a single day. The increase followed ostensibly encouraging news regarding the management of the current financial crisis, which had shaken the global economy and markets. 

In the weeks leading up to October 13th, 2008, the US stock market had experienced significant volatility and losses. In fact, the Dow had fallen over 22% from its all-time high of 14,164.53, which it had reached in October 2007, to its low point of 8,281.22 on October 10th, 2008. This drop had been attributed to a number of factors, including the subprime mortgage crisis, the failure of large financial institutions, and concerns about the overall health of the US economy. 

On October 13th, however, there was a glimmer of hope for investors. The US government announced that it would be investing $250 billion in nine major banks, in an effort to stabilize the financial system and prevent further failures. The plan also included a guarantee of certain types of bank debt and the creation of the Troubled Asset Relief Program (TARP), which aimed to purchase troubled assets from banks and other financial institutions. 

This announcement was seen as a positive step towards restoring confidence in the financial system, and the markets responded accordingly. The Dow Jones Industrial Average soared by over 11%, marking its largest one-day point gain ever. Other major indices also experienced significant gains, with the S&P 500 rising by 11.6% and the NASDAQ Composite climbing by 11.8%. 

Despite the optimism that followed October 13th, however, the markets continued to experience volatility and declines in the months that followed. The Dow would go on to hit a low point of 6,547.05 in March 2009, before beginning a slow and uneven recovery. By March 2013, the index had regained its pre-crisis levels and continued to climb to new highs in the years that followed. 

While October 13th, 2008 remains the best day for the markets in terms of single-day point gains, there have been other notable days in the history of the US stock market. In percentage terms, the biggest gain for the Dow Jones Industrial Average came on March 15th, 1933, when the index shot up over 15% (8.26 points) in response to Franklin D. Roosevelt's (FDR) Emergency Banking Act. The Act, which was signed into law on March 9th, 1933, aimed to stabilize the banking system and restore confidence in the financial sector during the Great Depression. The Dow had previously fallen over 89% from its high in 1929 to its low point in 1932, and the gains on March 15th, 1933 helped to signal a potential turning point for the US economy and markets. 

Other notable days in the history of the markets include Black Monday (October 19th, 1987), when the Dow Jones Industrial Average fell by over 22%, the largest single-day percentage drop in the history of the markets. This event is often attributed to the widespread use of computer trading algorithms and portfolio insurance, which exacerbated the selling pressure and contributed to the market crash.

More recently, the COVID-19 pandemic has had a significant impact on the markets, with notable swings in both directions. On March 16th, 2020, the Dow Jones Industrial Average fell by over 2,997 points, the largest point drop in a single day in history. This was due to growing concerns over the spread of the virus and its potential impact on the global economy. However, in the months that followed, the market rebounded and reached new all-time highs.

It is worth noting that while these events may seem dramatic, they are relatively rare occurrences in the history of the markets. In fact, the stock market has historically provided strong long-term returns, despite occasional short-term volatility.

Investors who are looking to build long-term wealth through the markets should focus on a well-diversified portfolio of high-quality stocks and bonds and should avoid making rash decisions based on short-term market fluctuations. By sticking to a disciplined investment strategy and remaining patient over the long term, investors can position themselves for success in the markets, even in the face of occasional turbulence.