Unprecedented dollar dips give rise to fluctuations which in turn give rise to instability which then promotes uncertainty and that leads to loss of confidence which then promises one thing and one thing only – destruction.
Here in the financial world, that destruction is commonly known as stock market crash and to be honest we frequently witnessed such horror in the form of black Mondays after black Mondays after black Mondays. If you think are there are other ways to put it you are welcome to do so but we strongly believe that this was worse than the great depression and for those of who don’t understand the impact of great depression, it was really worse like eating bread with water worse. Even if you had paid attention to investor awareness you couldn’t have saved yourself back then, imagine the trouble now?
As soon as the pandemic started to grip economies around the world because of businesses closure, people started to pull out money from the stock market which was a clear sign of no confidence as every indicator was denoting a nose dive. The markets plunged to the depths of economic abyss and businesses and corporations of all sorts, declared either bankruptcy or went under the mud. This meant economic recession, the worst that world had seen in decades, it made 2008 crises look like peanuts.
The world has seen a lot in terms of recession since we started dealing in money and made it the trading standards because no one can guarantee stability with this ever changing world. The ups and downs of stock market are fairly related to the real life happenings and increased confidence on businesses is verily translated as a higher investor confidence.
Start of miseries
Initially people weren’t able to comprehend what is actually happening because everybody was thinking how would a virus far away in the land of China make me lose my job? But that happened and as time passed, it became clear that everybody and by that we mean every single person on the face of earth is going to feel the heat of this virus. So millions of employees were furloughed and rest were fired, corporations shut down and the world came to a halt.
A dot that stopped time
This stoppage of trading over land and on seas led to the main fleet of plunging numbers in the stock market. Because there was no business open the cash flow literally halted around the world bringing down economies that were in debt especially. Third world countries had to bear the brunt of these unknown phenomena in ways that were yet unknown to the developed world.
Crash is common with the poor
Whenever there is a global phenomenon or catastrophe that impacts population on a global scale, the underprivileged take the most hit because they are already down. Poor countries are already struggling with repaying debts, creating ways to fight the unseen terrors specific to third world countries, and emphasizing on providing food and basic necessities to their citizens. At times like this, when the COVID pandemic hit such economies it was nothing short of nightmare for them because it made things tough for them even more.
You can better understand this by an example. A and B are two brothers: A is rich, powerful, and healthy and B is poor, weak, and malnourished. Suddenly one day both of them get ill by the same disease; now which of the two brothers you think made it out easily? Of course A! A had money and resources and he was already healthy so he had better chances of surviving the disease and he did. Now B was already struggling and weak, he succumbed to the disease without proper help from A.
Not the same boat
That is the same scene that is happening around the world with COVID taking lives. A can be considered as wealthy and first world countries that have excellent infrastructure and abilities to fight this disease whereas poorer nations or the third world countries neither have the proper infrastructure nor money to fight this pandemic. Therefore the economic crashes within these regions are not because of the same reasons too, yes COVID is the major factor for stock markets around the globe but risk associations with COVID has made it more difficult for developing countries to sustain the crash.
This proves that investor awareness across the world is important. If people in third world countries are as informed as those living in first world countries, it could mean the world of difference in between situations now and then.
The main reasons
As far as the main reasons that are hidden behind these market crashes are unemployment, wide spread proliferation of debt, and lack of trust. A combination of any of these reasons is enough to make the stock market come crumbling down as it becomes harder at the end of day to sustain the loss generated by any of these conditions.
When the pandemic came, it only meant that there was lack of confidence in money makers but there was general fear that nobody would come out of this alive. On one hand there were people who never believed in the virus and on the other hand were businesses that had to let people go because of the closure. People started hoarding the hygiene products around the globe because they thought that it was the only way they would survive but what this tension did was that it showed the general public mindset which was of course, scared.
Investor awareness play an important role in determining the outcome as investors realized that now is not the time of invest and pulled their chips out, and hence came the market crashing down, this is what caused your stock market to crash. From Dow Jones, S&P 500, to Nasdaq composite, every graph moved downwards denoting the economic stop.
Though governments tried to bail out big corporations but it was difficult for them too as no businesses were open and that meant no money was being pumped into the economy let alone circulated. When there is no money to roll and no income for a household, it simply means that the household had to starve and this is what happened with the stock market, literally.
A growing disbelief
Now that vaccines are rolling out and about 24 million people have been already vaccinated we believe that the crashes that we saw would soon enough be a talk of the past as the world is now trying to reopen with full potential.
Even after the distribution of vaccine there are chances that the virus will keep on spreading because it doesn’t guarantees anything. We have yet to see how does this confidence helps bring the market back to its original position because an economy that was left in ruins, have yet to pick up the pace. If in some way this disbelief can be tackled, we might be able to turn back the clock, not completely but slowly over time.
We hope that you now know why the stock market crashed but if you still have any questions, you can let us know right away. We’ll be more than happy to help you out.