How the events in other parts of the world affect the stock market
Global events, whether they are political, economic, or social, have a big effect on stock prices all over the world. These things can make the market volatile, change how investors feel, and change the basics of the economy.
The World Financial Crisis of 2008 The 2008 Global Financial Crisis, which began when Lehman Brothers went bankrupt, is the most famous example of a worldwide event that had a huge effect on stock markets.
Right away, stock markets all over the world fell sharply. From September 29 to October 1, 2008, the Dow Jones Industrial Average (DJIA) dropped the most points in a single day.
Investors were scared and unsure, which caused huge sell-offs. The VIX, which is sometimes called the "fear index," went up, which means that market anxiety is high.
Bear markets lasted for a long time after the crisis. It took the S&P 500 almost five years to get back to where it was before the crisis.
The Vote on Brexit Another big event that had immediate and long-lasting effects on stock markets was the Brexit vote in June 2016, in which the UK decided to leave the European Union.
Right away, the markets around the world reacted strongly to the outcome of the vote. In the two days after the vote, the FTSE 100 dropped by more than 8%, and the British pound hit a 31-year low against the US dollar.
Stocks in financial and banking companies took a big hit because people were worried about the security of the market and changes to regulations.
The confusion surrounding the Brexit talks caused the market to be unstable for a long time. Businesses and investors were still cautious, which had an effect on the flow of capital and choices about investments.
The COVID-19 Spill The COVID-19 pandemic is a world event that has never happened before, and it has wide-ranging effects on stock markets.
In March 2020, stock markets fell sharply, with the DJIA having its worst single-day drop since 1987.
Big fiscal stimulus packages and changes to monetary policy by governments and central banks helped keep markets stable.
Stocks in technology and healthcare went up because more people wanted digital services and medical goods.
The pandemic sped up trends like going digital and working from home, which caused tech stocks to go up in value. In the end, the markets got better, and by the end of 2020, the major averages had reached new highs.
Market volatility and uncertainty tend to rise when big events happen around the world. Sharp market moves happen a lot of the time because investors act quickly.
One of the most important ways to lower the risks that come with world events is to diversify your investments.
Changes in the stock market are often caused by events happening around the world. For instance, disasters can show how strong certain industries are, like how strong technology was during the COVID-19 pandemic.
Global events have big effects on stock prices that are hard to predict. Investors can learn a lot about how markets work and come up with plans to deal with future risks by looking at things that happened in the past, such as the 2008 Financial Crisis, Brexit, and the COVID-19 pandemic.
