Anyone that invests money in the stock market should be aware that there will always be periods of volatility. For those that invest over a long period of time, investment returns have traditionally been good. However, there are ups and downs that can cause a lot of concern. This past week, the stock markets across the globe had one of their worst weeks on record.
In the United States, the Dow Jones Industrial Average had four of the worst days in trading history in just a five day span. There are a variety of reasons why the market is having such a challenging time. Each of these reasons have given stock buyers pause, which has caused the markets to drop as quickly as they have.
One of the largest concerns this past week has been the continued outbreak of the coronavirus. While this used to look like a virus that was going to impact China the worst, it now appears to be having a major impact on all other places across the world. Overall, more than 80,000 people have tested positive for the disease and several thousand have died. To make matters worse, it appears that things and figures could soon look worse as the long incubation period means that many more people may have it but not yet be symptomatic. This could then lead to a prolonged shut down of industry in China and other parts of the world.
While the virus is certainly a leading factor for the recent decline, there are other contributing factors to the decline in the markets. Many experts have been calling for a correction for some time, and this recent event could just be the catalyst that causes it. Stock and financial experts have given a lot of caution in recent months due to the perception that stock prices were already overvalued due to the recent bull market. This recent drop could bring them more in line with expectations.
Another concern is the growing trade deficit, tensions with China regarding tariffs, and a slowing economy in some of the emerging markets. When all of these factors are put together, the recent 1,000 daily point drops could be an indication of things to come. However, in the United States, job creation has continued to be strong and unemployment has been low. Both of these factors could help give a boost to the markets to stop the decline.