The February of 2021 has witnessed some spectacular moments in the history of the US stock market. The market hit an impressive high, only to be followed by a shocking decline, 15 days later. For instance, one of the benchmark indexes, the S&P 500, hit the roof and then plummeted to less than a 20% decline in the stock value. It was also one of the most astonishingly quick stock market crashes in the last century in the US.
Now, the 20% decline of the market prices indicate the bear market, and the rapid decrease signals the onset of a crash.
Is it the end of the stock market crash?
The devastating stock market crash of 2020 has affected the entire global stock market. Most of the market indices across the globe have suffered a massive decline in the price rate. As such, questions regarding the ending of the crash are extremely relevant. Investors are worried if the stock values are going to fall any more. See Best Vanguard Funds UK 2021 for one of the best places to invest and understand the stock market.
Moreover, there are also questions related to the recovery of the market without causing any more declination in the stock value. It is without a doubt that the stock market can have a negative impact on the global economy.
Reasons that led to the stock market crash in 2020
There are multiple reasons that can be attributed as the cause of the 2020 stock market crash. However, the main reason is obviously the global pandemic. The coronavirus and its quick spreadage to the rest of the world at an alarming rate have negatively impacted the stock market.
With no actual precedent and a high mortality rate, the highly infectious coronavirus has caused a significant uproar across the globe. It has led to psychological panic, with most investors pulling out, leading to the intense crash.
There are two more secondary reasons that can explain the stock crash. One is the inevitably long bull market that came into effect after President Trump was elected for office. The bull market was due for an increased correction by now. Another reason is the oil feud that is currently going on between Saudi Arabia and Russia.
All these causes have inevitably played a huge role in causing the stock market crash of 2020.
A comprehensive review of the bear stock markets that prevailed in the US from the year 1929-2020
In order to review the bear markets that have existed from 1929 to 2020 in the US stock market scene, it is vital to define the criteria of a bear market. A decline in the price by a minimum of 20% is required to declare the market condition as a bear market. As such, there is a recorded 13 bear markets from 1929 to the present 2020. The current one is also the seventh severe bear market.
As per reports and expert analysis, bear markets that develop quickly suffer from less severe declines. It offers an optimistic outlook for the stock market in the new year 2021.
The stock market crash of 1929 and 1973 was quite similar. In the early quarters of 1930, the stock market witnessed about 50% retracement. It boosted the stock market and assisted in the rising of the stock values.
However, the bear market of 2000 was slightly different. It took a long time for the price to decline to the 20% level. And then it never came in close proximity to 50% retracement. It further lends credibility to the fact that the price above the 50% retracement (running) indicates whether there will be new lows in the bear market.
Comparison of the different stock market crashes
There are various technical reasons that explain why experts are of the opinion that the bear market of 2020 will extend than any of the previous ones. For starters, the primary factor for the present crash has never been seen before – the outbreak of a lethal pandemic.
The worst bear market, the one that happened in 1929, started with a market crash that led to a massive liquidity crisis. It ultimately caused a decline in demand. Now, the stock market crash of 2008 was quite similar to the one in 1929. However, in this case, the government took quick measures and took care of the liquidity problems.
However, there have been some quick but severe stock market crashes. For instance, the ones in 1998, 1987, and 1990 where singular events led to the crash. But the market dealt with it quickly. Now, some of the crashes like those of 1998 and 1987 were a result of the over-stretched bull run. As such, they were recovered, at a high speed.
Impact of the pandemic on the global economy
It is quite evident that the pandemic is going to impact the global economy devastatingly. However, the main question is how it can be resuscitated without declining the stock prices even more. The major issue is the impact of this lethal virus. And also the preventive steps taken by governments across the globe. Lockdowns and social distancing will undoubtedly lead to a loss in revenues and disruption of various businesses.
The economic doom can be counteracted with effective monetary policy and other well-prepared financial packages. Various governments have announced the extension of debts as a part of their step to combat the lethal pandemic. Vaccination or at least containment of the coronavirus is the only effective solution that can boost up the stock market.
Wrapping it up
The only option available now is to hope for the best scenarios possible. If the developed nations impose a successful lockdown and contain the spreadage of the lethal virus, it can have a positive impact on the stock market. However, financial reflation will be required. It is to ensure that there is no more damage to the price rate of the stocks. As such, it is unlikely that the stock market is going to crash any further. In fact, several reports suggest that it will actually rise within the end of the year and regain its footing.