posted on Oct, 10 2008 @ 06:50 AM
Originally posted by KOGDOG
Can someone point me to an article/etc that can define what a 10% or even a 1% drop in the DOW translates to in the daily lives of US citizens? How
does each percentage drop manifest itself in losses to the American people?
It's hard to measure something like that, KOGDOG.
The biggest and most immediate effect is usually in one's 401(k) or other retirement account with investments in the stock market. Most retirement
accounts are at least partially based on stocks, so a 10% loss could mean a 1% loss in portfolio value, a 5% loss, or a 10% loss. It could be more
depending on how that portfolio is invested. I've heard from more than a few people that their retirement accounts have lost anywhere from 20-50% of
their value. This is a huge deal to people nearing retirement age; if they had $1million in their retirement account, they may have suddenly found
themselves with $600k just a year or two from their planned retirement.
Market drops can also affect employment. If you work for let's say Ford Motors, their recent precipitous losses in stock value may well result in
layoffs. Or you may work for a local metal shop - if you buy metal from Alcoa to work on, their recent loss of value in stock may result in higher
prices charged on that metal, which would result in lower profit for the metal shop, which could then result in ... you guessed it, layoffs.
In normal market fluctuations, the average American, someone who doesn't play the stock market and who has plenty of years until retirement, a market
loss won't have tremendous effect. This, however, is an extreme market fluctuation, and the results that are now and will continue to be affecting
"Main Street" are only partially based on Wall Street.