I’ve got an idiot co-woker who fancies himself a reliable commentator on what he reads on the internet. Periodically during the day, he checks the NASDAQ, the DOW, and the NYSE, to see what trends appear to be developing. To the best of my knowledge, he has no stock portfolio of his own (although he has mentioned a cousin who has money in the market). Therefore, I’m not real clear on what his purpose is in checking the stock averages. No matter; if he gets a kick out of it, more power to him.
Anyway, he seems (in my view, at least), to have a very low threshhold for what he considers to be a stock market crash. And every time he sees the average go down by five points or so, he comments (out loud), “The stock market crashed.” I’m seriously considering asking him to dial that back, but I’m hampered by my own inability to understand financial markets (and disinclination to learn).
So my questions are: is there any consensus benchmark for the size of a decline in overall market value that would allow an observer to state: “This is a stock market crash,” or; “That is not a stock market crash,” based solely on the size of the drop (whether it be in absolute dollar amounts, or percentages)? And if so, where would that benchmark be?