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.
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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