Dow Jones record drop: causes
The American stock market is in a record decline. One of the key indicators, the Dow Jones index, dropped by 13% in previous trading, the worst result since 1987, when the “black Monday” recorded a decline of 22.6%.
The coronavirus epidemic has triggered a global financial crisis, which has affected all processes and exacerbated existing problems. It is rather difficult to assess the consequences of the current situation. Experts agree that the economic recovery will be long lasting, and the first positive dynamics should be expected by the end of the year.
Now the American Dow Jones Industrial Average index has 20 917.5 points. Apart from the coronavirus, the words of the US president also had their impact on the decline. Donald Trump said that the economy is in recession, and the epidemic and related restrictions may last longer than everyone thinks. After this speech of the head of the White House, quotes on the stock exchange fell sharply, which led to a decline in the Dow Jones index.
It is also worth noting that no effective measures were taken in time to keep the liquidity at an appropriate level. This fact also contributed to panic in the market and collapse of its important indicators. Only after that they started talking about the necessity of mass purchase of treasury bonds and mortgage bonds. Programs were launched to support a number of segments and introduce $800 billion in tax benefits. The latter will be aimed primarily at airlines and the tourism industry.
In March, the OPEC+ transaction was terminated, which regulated oil production volumes. Russia did not want to reduce the amount of crude produced, as a result of which Saudi Arabia reduced the price per barrel and caused panic in the market.
The situation improved slightly after Donald Trump officially declared the emergency situation in the country. After his words, the major indices on the stock exchanges began to grow by 5-6%.
However, experts believe that the measures introduced so far are not enough to overcome the crisis with minimal losses. It is difficult to assess the full extent of damage caused by the epidemic and the oil war between Saudi Arabia and Russia. It is important for the US to contain the fall of key indices and financially support the market, especially since investors are not in a hurry to invest money, but prefer to keep cash on hand until it is clear how to proceed. Experts hope that such a serious collapse of Dow Jones, as observed recently, will not happen, and gradually the economy will show positive dynamics.