Bear or Bull? The Fragile Global Economy and Stock Market
Stock markets are made to have their ups and downs. After all, the United States bounced back in the 1920s after a decade of Depression due to what is recorded as the first stock market crash in the world, and for a brief moment in the 1980s, it was thought that the stock market in the States and in a number of countries wasn’t going to recover from another nosedive. Playing the numbers is a risk, even in a gentleman’s game like the stock market, and whether it’s Hong Kong or NASDAQ, analysts have a difficult time of predicting exactly what’s going to happen. One thing’s for sure, though: no one quite knew what was coming in 2008.
Imagine then, the surprise at the turn that the global economy has taken in the past couple of years. People have watched in horror as bank accounts dwindled, companies were shuttered, and loans and credit became something that was increasingly difficult to maintain or apply for a new version of. However, it’s no surprise that after the events set in motion by the United States economy a couple of years back in the mortgage game, the world economy is currently recoiling
It’s no wonder that trouble in the United States could bring a global economy down, especially when the numbers are looked at. A significant chunk of the global economy depends on the economy and the markets of the United States. A number of smaller countries didn’t have the pleasure of getting bailed out by their federal governments, with countries such as Iceland going completely broke simply because a country that small could not possibly bail itself right out.
While in the past, the markets might not have been tied together as strongly, with globalization in all areas, especially business, things are a little different now. Markets depend on one another because nations depend on one another. Nations do a great deal of business, relying on one another for markets and raw materials, but more importantly, companies invest in each other’s markets.
It’s not just the economy, either. Many investment companies have recommended branching out from one’s home country and trying various markets around the world. When the American dollar is the base of so many financial interactions and it starts to slip, it takes a whole lot of value and wealth along with it.
What’s surprising is that no one was there sounding the alarm louder when the slip started to take place. After all, the United States has survived one Great Depression and dodged a financial bullet in the 1980s. There were supposed to be systems in place to stop things from getting to the point where worries were justified, let alone the point where the federal government has to step in and international leaders are wringing their hands.
This mess further spread to the markets, with the price of stocks tanking as people tried to get out while they still could. In the United States and in many European countries, digging the country’s banks out of this mess meant federal dollars going towards non-government institution’s financial recovery, with hopes of reinvigorating local economies and eventually, picking the international economy back up.
Playing the market has always been a little bit unpredictable, but the recent events are truly unprecedented. While regular people reading the newspaper might feel as though they have missed something significant in their inability to process recent current events in the financial sector, the fact of the matter is that it is baffling things were allowed to get this bad.
Damian Papworth loves stock market investing. It has become a major part of his work from home income.
Filed under: Trading
Leave a Reply