For the past few years, the stock market has continued to be relatively strong. While the Dow Jones and other major indexes have been able to hit all-time highs, there have continued to be high levels of volatility that has led to many believe the world is heading towards another recession. This week, the stock market had one of the worst two-day runs in its history, which has more people concerned than ever before.
Overall, the Dow Jones fell by more than 1,000 on both Monday and Tuesday, which marked the first time that had ever happened in a two day span. What makes this worse and more concerning is that there are many reasons why it could have declined so much. One of the main reasons why it declined was attributed to the continued spread of the COVO-19 virus, which is shaping up to be one of the worst outbreaks in a long time. Thus far, more than 2,600 people have died and more than 80,000 people have been infected. There have also been large increases in the number of infected outside of China, including in Italy and South Korea.
Another cause for concern is the upcoming U.S. presidential election. While this is still more than 9 months away, the popularity of Bernie Sanders is rattling the markets a bit. With his plans to increase taxes to corporations and wealthy individuals, those that are invested in the markets are concerned that there could be a decline in stock valuation due to reduced net cash flow.
Also, there is growing level of concern that the United States stock markets are simply overvalued. With stocks at a record high, many people are now seeing that company’s are trading at higher earnings multiples than ever before. This makes people believe that the chance of a decline in overall stock values is much higher.
While the markets declined a lot on Monday and Tuesday, they do appear to be rebounding. There are still plenty of strong economic factors in place, which include record-low unemployment and good job growth. It remains to be seen though how all of these economic pressures will impact values. As the virus continues to spread across China and other parts of the world, it could also make it hard for company’s to reach the same production schedules, which could have a negative impact on company earnings for the next year.