Stock market crash
Table of Contents
Stock market crash
The stock market, which is frequently seen as a sign of economic success, represents the capacity for businesses to raise cash and for investors to get a return on their investments. The stock market does, however, have certain inherent dangers. Volatility and crashes can significantly negatively impact portfolios, causing significant financial losses for people, businesses, and even the economy as a whole.
From the great depression of the 1930s to the Dot-com Bubble of the early 2000s, history is rife with examples of stock market crashes and their terrible consequences. It is crucial to comprehend the risks related to the stock market because such calamities can have long-lasting effects that linger for years or even decades.
What is a stock market crash?
A rapid and severe drop in the value of publicly traded stocks is referred to as a stock market crash. The collapse typically happens when there is widespread panic selling by investors, which causes stock values to plummet significantly. Various circumstances, such as economic downturns, geopolitical unrest, shifts in investor mood, and problems with the systemic financial system, can cause stock markets. The economy may be affected in multiple ways by a stock market fall, including decreased employment, company investment, and consumer spending. It may also result in large financial losses for investors and businesses.
Understanding stock market crashes
Stock market crashes are complicated and often challenging to comprehend. Investors panic and sell off their holdings during a crash, driving down stock prices. This may trigger a vicious selling cycle in which many investors sell their shares. Stock market crashes can greatly affect the economy, leading to corporate failures, job losses, and a fall in consumer spending. Investors and governments must comprehend the causes and effects of stock market crashes.
Preventing a stock market crash
The several steps investors can use to prevent a stock market crash:
- To prevent a crash, diversify the portfolio. A single stock, sector, or asset class should not include all an investor’s assets. Instead, investors should diversify their holdings across several stocks, bonds, and other instruments.
- Investors should avoid speculation, which is buying and selling securities based on short-term trends rather than long-term fundamentals. Instead, they should focus on the long-term growth potential of a company.
- Investors should monitor economic indicators, such as interest rates, inflation, and GDP, to gain insight into market trends. They should also monitor geopolitical events, which can impact the market.
- Regulators can implement circuit breakers, temporarily halting trading during a significant market downturn, preventing panic selling and giving investors time to evaluate their positions.
- Regulators should enforce regulations to prevent fraud, insider trading, and other illegal activities that can destabilise the market.
Causes of a stock market crash
There are several reasons why a stock market crash can occur are:
- A stock market collapse can happen during a recession when companies and consumers have financial difficulties, resulting in a drop in demand for goods and services and a subsequent decline in stock prices.
- Interest rates may significantly impact the stock market. A decrease in the stock market might result from investors shifting their funds from stocks to bonds or other investments that give higher yields when interest rates rise.
- Speculation occurs when investors buy stocks hoping to make a quick profit rather than investing in a company’s long-term growth. If too many investors engage in speculation, it can lead to a bubble that eventually bursts, causing a crash.
- Corporate scandals, such as accounting fraud or insider trading, can cause investors to lose confidence in a company, leading to decreased stock prices.
- Geopolitical events, such as war or political instability, can cause uncertainty and volatility in the stock market, leading to a crash.
- Supply networks can be damaged by natural disasters like hurricanes, earthquakes, or pandemics, creating economic uncertainty and a drop in stock values.
- Sometimes stocks can become overvalued, meaning their prices are higher than their actual worth. This can occur when investors become overly optimistic about a company’s growth prospects, leading to a bubble that eventually bursts.
Examples of stock market crash
For example, the peak of the world financial crisis in 2008 saw a stock market meltdown. The crisis, which affected the entire global financial system, was caused by the subprime mortgage crisis in the United States.
Stock market losses were frequent due to investors’ growing scepticism over the dependability of banks and other financial organisations. Compared to its 2007 peak, the Dow Jones Industrial Average fell 33.8%, and some investors suffered substantial losses. While causing a global recession, the crisis demonstrated how intertwined the financial system is. Additionally, it compelled lawmakers to enact new rules intended to avert similar financial catastrophes in the future.
Frequently Asked Questions
While it is impossible to prevent a sudden market crash completely, some measures can help reduce the risk of such an event. These include implementing safeguards such as circuit breakers, improving transparency and oversight, and diversifying investments. Additionally, proactive risk management strategies can help investors and businesses mitigate the impacts of a potential crash.
Stock market crashes are typically characterised by rapid declines in stock prices, high levels of trading activity, and widespread panic among investors. Crashes can be triggered by various factors, including economic downturns, corporate scandals, and geopolitical events, and can significantly impact the broader economy.
History’s most famous stock market crashes include:
- The Wall Street crash of 1929
- The Black Monday crash of 1987
A circuit breaker is a regulatory mechanism designed to halt trading in a particular market in the event of significant price declines. When triggered, circuit breakers pause trading for a set period to allow investors to reassess their positions and prevent a complete market meltdown.
When a stock market crashes, investors experience significant financial losses as stock prices decline rapidly. This can lead to widespread panic and a sell-off of stocks, further exacerbating the decline. Businesses may also suffer, as declining stock prices can impact their ability to raise capital and access credit.
Related Terms
- Market maker
- Options expiry
- Payment Date
- Treasury Stock Method
- Reverse stock splits
- Ticker
- Restricted strict unit
- Gordon growth model
- Stock quotes
- Shadow Stock
- Margin stock
- Dedicated Capital
- Whisper stock
- Voting Stock
- Deal Stock
- Market maker
- Options expiry
- Payment Date
- Treasury Stock Method
- Reverse stock splits
- Ticker
- Restricted strict unit
- Gordon growth model
- Stock quotes
- Shadow Stock
- Margin stock
- Dedicated Capital
- Whisper stock
- Voting Stock
- Deal Stock
- Microcap stock
- Capital Surplus
- Multi-bagger Stocks
- Shopped stock
- Secondary stocks
- Screen stocks
- Quarter stock
- Orphan stock
- One-decision stock
- Repurchase of stock
- Half stock
- Stock options
- Stock split
- Foreign exchange markets
- Stock Market
- FAANG stocks
- Unborrowable stock
- Joint-stock company
- Over-the-counter stocks
- Watered stock
- Zero-dividend preferred stock
- Bid price
- Authorised shares
- Auction markets
- Market capitalisation
- Arbitrage
- Market capitalisation rate
- Garbatrage
- Autoregressive
- Stockholder
- Penny stock
- Noncyclical Stocks
- Hybrid Stocks
- Large Cap Stocks
- Mid Cap Stocks
- Common Stock
- Preferred Stock
- Small Cap Stocks
- Earnings Per Share (EPS)
- Diluted Earnings Per Share
- Dividend Yield
- Cyclical Stock
- Blue Chip Stocks
- Averaging Down
Most Popular Terms
Other Terms
- Direct market access
- Deficit interest
- Strong order book
- Economic calendar
- EPS forecast
- Fiat money
- Adjusted distributed income
- International securities exchanges
- Settlement currency
- Federal funds rate
- Active Tranche
- Convertible Securities
- Synthetic ETF
- Physical ETF
- Initial Public Offering
- Buyback
- Secondary Sharing
- Bookrunner
- Notional amount
- Negative convexity
- Jumbo pools
- Inverse floater
- Forward Swap
- Underwriting risk
- Reinvestment risk
- Final Maturity Date
- Secondary Market
- Margin Requirement
- Mark-to-market
- Pledged Asset
- Yield Pickup
- Subordinated Debt
- Trailing Stops
- Stochastic Oscillator
- Bullet Bonds
- Basket Trade
- Contrarian Strategy
- Exchange Control
- Notional Value
- Relevant Cost
- Dow Theory
- Speculation
- Stub
- Trading Volume
- Going Long
- Pink sheet stocks
- Rand cost averaging
- Sustainable investment
- Stop-limit sell order
- Economic Bubble
Know More about
Tools/Educational Resources
Markets Offered by POEMS
Read the Latest Market Journal
继前一篇我们介绍了越南市场后,接下来我们将介绍泰国市场,泰国的表现一样引人瞩目。 受结构性问题影响,相较于菲律宾、马来西亚、印度尼西亚和越南,2023年,泰国全年GDP增幅远低于其他国家。泰国2023年GDP同比2022年增长1.9%,低于市场预测的2.5%。 2023年,中国-东盟自贸协定零关税给泰国带来了直接且沉痛的打击。由于消费疲软、贸易壁垒等政策影响,产能过剩,导致大量低价进口中国商品涌入,使得2023年泰国与东盟9国的总贸易额出现了3年来的首次下滑,其总贸易额为4万亿泰铢(约1489亿新元)。由于巨大的成本价格差异,其中泰贸易逆差扩大至1.29万亿泰铢(约480亿新元)。其中,小家电、蔬果、箱包和服装行业处境最为艰难。 尽管如此,旅游业的复苏增长带动了非农业产业的增长。政府数据显示,2023年来访泰国的总人数达3.15亿人次,较去年增长40.3%。其中,国际游客超过2800万人次,马来西亚和中国为最大客源。随着泰国对中国和哈萨克斯坦实施免签政策和其他活动措施,预计2024年将带来更多游客,推动泰国旅游业的复苏进程,并力争实现2024年旅游营业收入达到3.5亿泰铢(约0.12亿新元)的目标。 热销股票 1. ADVANCED INFO SERVICE PUBLIC CO., AIS,AIS通信(ADVANC.TH) AIS通信是泰国的最大移动运营商,主要经营三大业务线,包括移动业务、AIS Fibre品牌下的高速家庭宽带业务,以及企业业务。同时AIS也提供多样化的数字生活服务。AIS通过数字智能基础设施、跨行业合作和人力资本与可持续发展这三方面,致力于“成为泰国最受尊敬的认知科技公司”的愿景。 (来源:AIS2023财年年报)...
指数差价合约是区别于投资个股、指数期货或交易所交易基金(ETF)的一种热门替代品,因为该工具允许您获得特定指数的风险投资组合,并从柜台价格走势中获益,无论做多或做空。此外,由于差价合约的杠杆特性,交易者只需拿出合约价值的一小部分作为初始合约的抵押品即可启动一笔合约。这样,交易者就可以方便快捷地进行整个市场的交易。 本期重点摘要: 股票指数只是一组资产的集合,它概括了股市中某一行业板块的表现。许多此类指数根据不同的标准包含和/或排除某些股票。 指数差价合约有助于利用构成单一指数的各种股票分散您的投资组合、实现投资组合多样化。这也有助于避免 “选择悖论”:指数帮助您决定投资哪些股票。 最重要的是,指数差价合约让交易者获得对指数的接触,而不用购买组成指数的个股。这种具有成本效益的策略让您只需交易指数的价格变化,而无需拥有相关指数本身。 什么是股票指数? 当人们说 “今天市场上涨了 “或 “市场下跌了 “时,你会不会好奇,分析师是如何评估整个市场? 这很简单,他们只需分别将按照今天的报价和昨天的报价购买所有公司所需的金额相加。两相比较下,如果发现今天的数字大于前一天的数字,那么我们就知道今天的市场上涨了,反之亦然。然而,数字的汇总和对比可能会很繁琐和麻烦。创建指数就是为了方便测量。 因此,”股票指数 “一词指的是一组股票(或其他资产)的集合,它提供了股票市场特定部分表现的概况。该指数被用作一个替代指标,用来衡量市场在特定时间段内的涨跌情况,比如以上例子中所描述的逐日指数。...
本文旨在为中级外汇交易者提供必要的信息和知识。它将涵盖我们上一篇文章 “五分钟看懂世界上最活跃的市场-外汇差价合约(FX CFD)...
解锁台湾股市的投资潜力!深入了解由强大的技术驱动型经济推动的股票市场,2023 年机械和电气设备将占出口的 69%。在政治稳定、投资者友好的法规和健全的法律框架下,探索台积电和富士康等全球顶级企业。台湾股市值得称赞的历史表现和在国际贸易中的的重要性使其更具吸引力。在这个科技实力雄厚、经济稳定、充满活力的股票市场中,抓住增长机遇!
了解外汇市场 外汇交易市场又称外汇市场,是一个买卖货币的全球性金融市场。它是全世界规模最大、流动性最强的金融市场,每日交易量超过 6 万亿美元。但外汇市场有一个重要却常被忽视的一点,就是它受交易心理的影响。在本文中,我们将探讨外汇市场的复杂性,还有把重点放在交易心理与传统交易策略共同发挥的关键作用...
五分钟看懂世界上最活跃的市场 -外汇差价合约(FX CFD)
外汇交易市场俗称外汇或外汇市场,是全球金融市场的支柱。它是世界上最活跃的市场,2022 年 4 月,全球交易额达到创纪录的每天 7.5 万亿美元[1] 。这个活跃的市场为交易者提供了利用货币价格波动赚取利润的机会。在本文中,我们将解释外汇市场的基本原理,助您了解其投资机制。 什么是外汇? 外汇市场是一个分散的全球市场,世界上所有货币都在这里进行交易...