IMF and UN have confirmed the Stock market crash. It began with the history’s largest point plunge for the Dow Jones Industrial Average (DJIA) up to that date. It was followed by two more record low-point plunge on March 12 and March 16.
A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth.
“It is now clear that we have entered a recession as bad or worse than in 2009,” said IMF Managing Director Kristalina Georgieva told reporters at a news conference.
However, a UN report suggests that India and China will be the least affected by this recession.
In this article, we look at the causes, repercussions, and timeline of the crash. And if you think that it won’t affect you as you have no investment in the market, then this post will change your mind.
Timeline Of Crash
On 12 February. The Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500 Index reported their record highs.
24 to 28 February. Stock markets worldwide reported their largest one-week decline since the 2008 financial crisis.
9 March. Most global markets reported severe contractions, mainly in response to the coronavirus pandemic and an oil price war between Russia and Saudi Arabia. This became colloquially known as Black Monday I.The worst drop since the Great Recession in 2008 was reported.
12 March. Three days after Black Monday I there was another drop, Black Thursday, where stocks across Europe and North America fell more than 9%. Wall Street experienced its largest single-day percentage drop since Black Monday in 1987
16 March. All three Wall Street indexes fell more than 12% when markets re-opened. At least one benchmark stock market index in all G7 countries and 14 of the G20 countries have been declared to be in bear markets.
As of March 2020, global stocks have seen a downturn of at least 25% during the crash, and 30% in most G20 nations.
What Are The Causes?
Crude oil war between Saudi Arabia led OPEC and Russia:
Due to coronavirus pandemic, many businesses were closed down or limited their production, thus demand oil price decreased. This, in turn, will reduce the price of war. So OPEC in a meeting asked its members and non-OPEC members to lower the production of oil to stabilize the oil prices. But Russia refused and instead increased the production of oil. This increased the supply and thus the prices of oil declined further. On 8 March 2020, Saudi Arabia initiated a price war with Russia, triggering a major fall in the price of oil, with US oil prices falling by 34%, crude oil falling by 26%, and brent oil falling by 24%. The price on 20 march was 20$ which was 60$ a few months earlier. The oil price drop triggered unprecedented pull ou from risky assets.
It Was already Predicted:
In August 2019, a survey of economists by the National Association for Business Economies was conducted. It concluded that 72% of analysts expect a US recession to hit by the end of 2021. The coronavirus outbreak, however, accelerated the cycle and the recession was realized in March 2020.
The fear of recession due to the spread of the COVID-19 pandemic has made many investors pull out their risky assets. This, in turn, resulted in the crash. As per government data of India, there were 942 active cases while 20 patients succumbed to COVID-19 and 99 have been discharged from the hospitals.
Repercussions Of Market Crash
- The sharp rise in unemployment. The small capital businesses will be shut down and the employees will be unemployed.
- The collapse of the tourism industry. When the value of the currency falls, the income of citizens also falls. Thus, they will be unable to travel.
- Increase in government debt. The government’s major income is taxes and exporting the resources. The recession will reduce the taxpayers (unemployment )in the country. Also, the countries might not be able to buy the resources and thus there will be no one to sell the resources to.