It’s part of the rhythm of life! Will the Stock Market Crash in 2022? Chances are, you’ve already lived through at least two major crashes and recessions. 8 In fact, economists are now saying the recession from the coronavirus crash was the shortest on record-only lasting two months! 9 Still, the stock market recovered ground pretty quick, and the year closed with record highs. The Coronavirus Crash, 2020: In March of 2020, the COVID-19 pandemic triggered the most rapid global crash in financial history.7 But after a couple of years, the market was stronger than ever before-we were basically in a bull market (a period of strong economic growth) from 2009 to just before the coronavirus crash. The Great Recession, 2008: The DJIA lost more than 50% of its value in a really short time.Just one month later, the stock market had returned to September 10 levels and kept going up throughout the end of 2001. September 11, 2001: Terrorist attacks in our country caused a major hit on the market, but it corrected itself super quick.4 But within two years, it had recovered everything it had lost. The Stock Market Crash, 1987: The market lost 22.6% of its value in one day known as Black Monday.It was the industry from World War II that helped get things back up and running. 3 It took a little over a decade for the economy to get back to predepression levels. The Great Depression, 1929: Over the course of a few days, the DJIA dropped nearly 25%.When we look back, we’re reminded that, yes, a market crash is a very difficult thing to go through, but it’s something we can and will overcome. Throughout history, the market has gone through a lot of extreme ups and downs. No wonder it feels like such a roller-coaster ride! Previous Stock Market Crashes: Examples From History Our point here is this: The stock market’s value is 100% based on perception and prediction of the future. Next thing you know, everyone is dumping their stocks, and the market is in a full-fledged crash. Then, stock values start to dip, and more investors sell their shares. Once investors see other investors selling off their stocks, they get pretty nervous. The same kind of panic can trigger a stock market crash. But when people lost their minds and started stocking up on toilet paper, their actions created a shortage!
There wasn’t a shortage before people started panicking. As news of the virus spread, grocery and convenience stores all across the world sold out of toilet paper in a matter of days. Was there a toilet paper shortage? Well, yes and no. Let’s walk through an example from the coronavirus pandemic that shows you just how powerful panic is. The reality is, panic has just as big of a role in a stock market crash as the actual economic issues that cause it. So, if they think the company they’re invested in is headed for hard times, they sell that stock in an attempt to get out before the value drops. The value and the price of those stocks are based on how well investors believe the company will do. Here’s how it works: Stocks are small shares of a company, and investors who buy them make a profit when the value of their stock goes up. What Causes a Stock Market Crash?Ī stock market crash is caused by two things: a dramatic drop in stock prices and panic. It’s like watching a plane take a nose dive. If you look at a historical graph of one of these indexes, you can see why we use the term crash.
To help us visualize how well the stock market is (or isn’t) doing, we look at indexes like the Dow Jones Industrial Average (DJIA), the S&P 500 and the Nasdaq.
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Market chaos, inflation, your future-work with a pro to navigate this stuff. The end result is that people could lose a lot of the money they invested. That drives down the value of stocks for other shareholders, who also start selling their shares to try to cut their losses. What Is a Stock Market Crash?Ī stock market crash is a sudden and big drop in the value of stocks that’s caused by investors selling their shares quickly. So, will we see the stock market crash during the rest of 2022? Let’s take a look at some of the major factors (with a cool, level head) to better understand where the market is going. According to The State of Personal Finance 2022 Annual Report, less than half of Americans (44%) were actively investing by the end of 2021. It’s also driven some investors to the sidelines. 1, 2Īll this fear and uncertainty about what’s coming next has led to whispers about the potential of another stock market crash-the first since the start of the coronavirus pandemic back in 2020. Worries about inflation, rising interest rates, and Russia invading Ukraine in February sparked another wave of volatility for the stock market. For investors, 2022 has been quite a roller coaster.
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