Stock market crashes to the lowest point since 2008 amid Coronavirus fears

Stock Market under CC BY-ND 2.0

By February 28, stocks crashed, creating record losses of $5 trillion throughout the market. The DOW, an index of the performance of the top 30 companies in the stock market and an effective measure of the success of the market, fell a total of 1191 points, the most substantial drop in human history. The dramatic losses, primarily triggered by COVID-19, a strain of coronavirus wreaking havoc among continents, sparked panic among investors and non-investors alike.

By triggering the stock crashes, COVID-19 remains a stark worry even for people not at risk of infection. Though many remain untouched, COVID-19 still has the potential to cause harm to the economy. However, its impact may be overblown. “At least what sparked the downturn was fears and uncertainty about the virus, which I think was generally right. I mean, there are many other factors that go into it,” Tyler Saxon, an economics professor at Bellevue College, explained. “The market has been sort of in a precarious position for some months and potentially years now. And so, this is kind of the spark like that pushed it over the edge.”

Despite the precarious position, COVID-19 still has the potential to wreck the economy. The devastation it has wrought in certain areas of the world has ruined their economies, in turn affecting other countries. After China, South Korea, Italy, Iran and Japan are the hardest hit by the virus. Though infection rates are trailing off in China, they’re rising in places such as South Korea and Germany.

American infection and death rates remain fairly low, although activity rises by the day. Seattle is facing the highest infection rates in America, with 10 deaths, all from the same nursing home. Many workplaces and schools are taking precautions and considering closure. In Renton, Hazen High School closed after learning one of its students was infected. Other schools are judging the threat with the same caution. However, efforts at creating a vaccine are already underway in Seattle at Kaiser Permanente. Furthermore, death rates remain low with only the elderly or chronically ill at serious risk.

Beyond the various world economies at risk, certain industries are affected by the virus, regardless of how impacted their operating country is. “I think the biggest fears right now are around travel and tourism. People are more afraid to travel,” Saxon explained. “So, it’s most likely expected that the tourism industry is going to be hurt by this.” Furthermore, mass uncertainty of any kind will take its toll on the market. “I think a lot of it is not even necessarily that people think things are going to get bad, but people are uncertain,” Saxon said.

Still, despite the significance of the first drop, markets began recovering quickly afterward. The Federal Reserve System in the U.S. cut interest rates by half a percent, a move that’s historically worked to boost the economy by encouraging loans. However, after the short recovery period, numbers began to drop again. The market’s future remains uncertain. “I’ve been telling my students the last couple of years that a recession is coming soon,” Saxon predicted.  “I mean, now it’s been said ten, twelve years since the last recession, which is unusually long. We usually don’t go that long in between recessions.”

Recessions are defined by low economic growth and production. However, “What causes the recession will have a significant impact on what it will look like,” Saxon explained. “You typically see a rise in unemployment. But in this one, well, you would probably still see a rise in unemployment, but also people not working who still technically have jobs.”

Still, predictions around the recent stock crashes remain uncertain. Nothing is set in stone. Furthermore, regardless of the future, panic, fear and paranoia rarely help any situation.