“We happen to be pretty close to a 50% crash in the global stock market”- It is an alarming statement issued by an expert in the field of stock markets. There is no denying that a statement of this magnitude is grave enough to cause disturbance in the entire stock market.
Let’s look into the details of peril contained in this statement.
What is a stock market crash all about?
Stock market crash is supposed to be a very dramatic, intense as well as drastic decline at stock prices. It might take place at various stock markets around the globe. When it happens it takes a toll on paper wealth. In most cases these crashes are triggered by intense panic levels. Apart from panic levels, there are some economic optimism related factors, which play a crucial role in creating these crashes.
Reasons working behind it
It you intend to go deep into the scenario you will find a series of reasons triggering a phenomenon such as Stock market crash. Those reasons are-
- Stock prices rising steadily for a long stretch of time
- Unpredictable crowd behavior
- Margin debts being extensively used
- Discrepancies in the P/E ratios
- Extensive and unpredictable alterations taking place in the regulations of stock markets and Federal rules
- Significant corporate hacks
Impact on other markets
It is not that the crash is taking place only in the stock markets. The matter of fact is that it is evidently taking place in other related fields of commerce. The stock market looks sluggish as well as weak all over the globe. Not only the stock market but the real estate as well as the bond market appear to be in some sort of a trouble.
The impact is actually going to be hurled on the asset classes. The aggressive volatility has even made an impact on big names such as Russell, Nasdaq, Dow Jones Industrial etc. Experts in this field are making all the speculations as to how to lessen the impact and make things going on in a normal pace.
What does statistics say about the situation?
Global banking organizations have come forward to add some stimuli into the situation by purchasing a whopping amount of $60 billion worth of international assets every month. According to industry experts, such an action is a mandate to deal with the volatility that exists in the market presently.
Surveys reveal that inducing as well as accumulation of wealth and enhancement of asset prices would be two crucial measures to counterattack the aftereffect of stock market crash.
Effective measures which are being taken
Industry experts are of the opinion that focusing on asset classes and proper asset pricing would be the best way to deal with the gravity of the situation. European banking fraternities are also pinning hopes on extensive levels of bond purchases. Strategic action step such as quantitative easing is also going to be necessary to curb the mayhem of credit crisis and other ancillary problems in the stock markets.
Capital inflows can offer a remedy
A significant quantity of capital inflow is also thought to be vital in terms of breathing some life into this dreary situation. Enhancement of asset prices might assume a role of significance in this context. To make things work normally once again it might be necessary to encourage some fabrication of demands as well.
Global Banking & Finance Review
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