Some of us look at the stock market and think “I don’t get it,” “It’s too confusing and boring” and “Does it really matter?” The answer to the last question is YES. All caps, in bold YES. As 20somethings, it’s important that we know how the market moves, as it’s basically an indicator for how our economy and the global economy are performing as a whole.
Yesterday will go down in history as being one of the most volatile trading days in history. The Dow Jones Industrial Index (the one that has America’s largest 30 corporations trading on it), fell almost 600 points on Monday. The S&P 500 and Nasdaq, which also trade many companies, fell about 78 and 180 points respectively.
To break it down simply, here’s what you need to take away from this historic day:
1. This market sell-off is happening mostly because of China.
Economic growth in China is slowing, which causes concern for global investors. Once global investors become pessimistic, it can ‘spook’ the global markets, which results in trading days like this around the world.
2. The Dow Jones was falling by as much as 1,100 points during trading and rose almost 550 points thereafter.
That’s nearly a 1,700 point swing. Something of this magnitude has not happened since a glitch caused panic in May 2010.
3. Oil prices are falling faster than a brick being dropped off a 100-story building.
This can be both good and bad. Good for the consumer, as it may contribute to falling gas prices in the near future, but bad as it can cost oil companies millions of dollars and may cut back on supply.
4. There really is a ‘fear index.’
It’s called the VIX. It jumped to its highest level since February 2009. It measures fear and panic amongst traders. It’s really pessimistic so it isn’t a good thing. The higher the VIX, the higher the panic (it’s around 40 right now, which is relatively high).
5. Depending on what today brings, it’s important to know that this market is currently in correction mode.
This means that most of the gains the stock market had in recent months have been wiped away to an extent, but it isn’t anything to be alarmed about, for now.