Markets Crushed Today – What Happened?
That was fast…
After rising at the fastest rate in market history over the last month or so the market got crushed today.
The Dow Jones Industrial Average (DJIA) fell by 6.9% today or 1,862 points. This index tracks the 30 large blue-chip stocks in the world.
The S&P 500 index fell by 5.9% today or 188 points. This index tracks the 500 largest companies in the world.
And the NASDAQ Composite index fell 5.3% today or 528 points.
This is a tech industry heavily weighted index that fell this large amount one day after this index hits it’s all-time intraday high of 10,085.72 on June 10th 2020.
This was a fast change after a month and a half plus of going straight up.
First up are fears of a second wave of the coronavirus hitting the US and the world.
Because over the last few days new coronavirus cases spiked worldwide after days of falling.
Pay attention to the right of the graphic above… Specifically the dip and then large rise.
This spike is due to the partial opening by city, state, and country governments nationwide.
The protests that are ongoing.
And, because more people are traveling now that it’s the Summertime travel season.
Because of this spike in new cases scientists, analysts, and the media alike are all wondering if this is a “second wave” of the virus hitting the world.
While its too early to know for sure, I wouldn’t call this a second wave… The virus wasn’t under control or gone in the first place.
We were just locked inside, so it’s no wonder why cases started going down.
Now that people are doing more outside its no surprise cases are going back up.
The second reason the market crashed today was because of what Federal Reserve Chairman Jerome Powell said yesterday during his news conference.
On June 10th, Chairman Powell outlined gave his monthly remarks on the economy… And they weren’t optimistic.
Chairman Powell said the Federal Reserve projects unemployment to remain at least as high as 9.3% through the end of this year.
And he said The Fed doesn’t expect unemployment to be anywhere close to the 3.5% rate we saw before this crisis started, anytime until at least the end of 2022.
He went on to say that The Fed plans to keep interest rates near 0% until at least 2021 as well. This due to the economic issues caused by the coronavirus and the subsequent lockdowns.
All these mean that The Fed assumes any economic recovery we have now will be slower than originally projected.
What does this mean to you?
We’ll see what The Fed and other government sources say in the coming weeks when they release updated GDP numbers. But as of now the Organization for Economic Cooperation and Development (OECD) projects US GDP to fall by 7.3% for this full year 2020.
This would be the largest yearly fall in GDP since 1946. The year after World War 2 ended and the economy slumped due to factories and manufacturing retooling their facilities back to producing goods instead of war materials.
If a second wave hits, now or in the Fall the OECD projects US GDP to fall by 8.5%. Again, the worst since 1946.
The only years worse in US history in terms of GDP contractions were in the following years.
• 1930 – GDP contracted by 8.5% – The Great Depression
• 1932 – GDP contracted by 12.9% – The Great Depression and all time US fall in GDP.
• 1946 – as mentioned above.
That’s it going back to 1929 when GDP started being recorded.
In other words, we’re already looking at a top 6 worst GDP contraction in US history. And this is if no second wave of the coronavirus happens.
If one does happen, we’re looking at a top 3 worst GDP contraction in US history.
And when GDP contracts, more businesses will go out of business. And more people will lose their jobs than the tens of millions who already have.