Skip to content
John Authers

Stocks Are Hostage to the Tyranny of Round Numbers

Moves around a 20% decline are a fascinating exercise in crowd psychology. They don’t tell us much about whether we’re in a genuine bear market.

If only they were this easy to spot.

If only they were this easy to spot.

Photographer: TIMOTHY A. CLARY/AFP/Getty Images

To get John Authers’ newsletter delivered directly to your inbox, sign up here.

Arbitrary round numbers matter, even though they shouldn’t. The definition of a “bear market” as any peak-to-trough drawdown of 20% or more is unhelpful. The difference between losses of 19.95% and 20.05% is minimal. But the definition is often cited, and it has an impact on how people behave. Which brings us to Friday’s trading, when the proximity of the 20% landmark combined with options expiry to create some fun.