The world economy is passing through a great turmoil nowadays. A huge recession is going on in almost all the stock markets of the world. This recession had started from America and has reached Asia and Europe now. This is the first great downfall since Donald Trump’s presidency. Here, one thing noteworthy is that we have seen much tweets coming from White House during this recession period. Since the Trump’s success in America, Dow Jones Industrial average has shown a huge 40% rise. Most of the financial experts were expecting that this bubble in the value of Dow Jones will burst one day.
The world saw one of the biggest one day point drop in the history of Dow Jones on Monday. Also, the S&P has also shown the worst drop since 2011. Dow Jones fell 1175 points on Monday. Most of the experts are not considering it a market crash. Instead, they are of the view that this less than 5% drop in Dow Jones is a correction. This is because there was a 500 point drop in Dow on an opening of the market on Tuesday. After that, it entered the positive zone once again.
Coming to the reasons of this drop in the market we can say that there are two major reasons for it. First, the markets have gone up too much in short interval of time. In other words, the markets were ripe and ready for fall. The second reason is that the central banks across the world have given a lot of money as loans on little profit margins. Also, the increasing prices of commodities, inflation, increasing wage rates, and rising bond yields have surprised the investors all over the world.
Also, we have seen a lot of overconfidence in investors in 2017 as they began to show more interest in virtual money. This volatility in the American market has also shown its effects on Asian and European markets. The Nikkei225 in Tokyo has also shown a loss of about 4.73 percent yesterday. The Australian ASX200 has shown a decline of about 3.2 percent. In Europe, the German DAX opened more than 400 points down yesterday. It was 1.59% down at the end of the day.
The analysts are saying that the market is trying to correct itself after a great slump due to overvaluation of stocks in recent days. But, some analysts are also warning that this market drop may prove reckless in the coming days.