Data compiled by Bloomberg reveals that according to the Standard & Poor’s 500 index, there has been a massive drop in stock prices. The US stock markets valuation has experienced a 10% drop in the last couple of days. This translates to a loss of $2.6 trillion for the economy.
This has been the worst April for the United States stock market since 89 years back when we had the Great Depression which was brought about by the devastating crash of 1929.
The stock market is shaky, and this goes beyond last week’s sell-off. Worse is yet to come, and we need to be prepared for a global market crash. The massive level of volatility for the stock market is shown in the Dow Jones Industrial Average (DJIA) and the S&P 500.
Despite showing stable long-term trends, stock exchanges can gain or lose large values within short periods. At times sudden shifts occur, and even experts are caught unawares.
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Stock valuations are so unpredictable and change on a daily basis. This volatility can be caused by a variety of reasons which include:
i. Current political state and government interventions.
ii. Bank Interest Rates.
iii. Actual demand for the shares.
iv. The financial health of the company.
v. The resignation of well-known directors.
vi. Miscellaneous problems such as company strikes.
Tech industry billionaires have been the worst hit in the recent stock market plunge. These peoples’ net worth is directly tied to their companies’ stock prices and a dip in the market results in a proportional loss.
Mark Zuckerberg, for example, has seen his fortunes shrink by more than $10 billion. Within two days in which there was a data scandal surrounding his company, the Facebook founder and CEO lost $9 billion.
Another tech company that is also having a decline in its profit margins includes Apple. The company recently released the iPhone X, which did not get as great a reception into the market as had been anticipated. This has already affected its stock prices.
Just recently, Donald Trump criticized Amazon and said the online retailer is taking advantage of small retailers.
Another factor that has played a major role in the fluctuations being experienced is the introduction of cryptocurrency. Last fall, Bitcoin prices shot up as buyers went on an investment spree for not wanting to miss out on such a great opportunity.
Today Bitcoin has fallen to below $7,000.
Aggressive buying, as well as reduced buying interest, are some attributes that made the prices to fall. Panic buying is almost always never a smart choice.
According to Dow Theory, the distribution phase is usually the warning phase for an upcoming downtrend. Here, you find big sellers after sensing trouble, selling their stock to other buyers.
