Riding the Storm: Navigating the Intense Stock Market Plunge - How Low Will We Go?
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- Seismic shifts in the stock market are intensifying – forecasting the market's imminent plummet.
The tumultuous wave on global stock exchanges persists. Even the German stock market benchmark DAX took a nosedive again on Monday. Will this trend continue, or will an upturn follow soon? Here's a rundown:
Why is the market's response so intense?
The US administration has left no room for doubt regarding its ambitious economic policy, imposing high tariffs on imports from around the globe. Even when US President Donald Trump hinted at negotiations with affected countries, the stance remains unchanged.
If this persists and the main trading partners EU and China resort to counter-tariffs, most experts believe it will stifle global economic growth. Consequently, even the optimistic investors seem to have cast off hope for improvement, preferring to offload their stocks. "The selling pressure has escalated drastically at the start of the week," financial analyst Andreas Lipkow remarked. "Nerves are frayed."
What do experts suggest to private investors in this scenario?
With US President Donald Trump's trade policy as unpredictable as it is, the future prospects for stock investors are equally erratic. In the short term, they can expect further price drops. Since the day following Trump's tariff declarations, the trend has been steadily declining.
"The stock market sentiment is as bleak as it's been in a long while," noted capital market strategist Jürgen Molnar from broker RoboMarkets. "No one wants to catch the falling knife, risking catching the next counter-tariff measure from Europe."
Portfolios have already amassed losses or witnessed profits dwindle in a short period. While these are only paper losses for the time being, as long as nothing is sold, they could transform into real losses in the future, potentially changing dramatically over a few months or years. Therefore, many experts urge adherence to a timeless stock market axiom: Don't sell in a panic, weather the storm, and wait for better days.
How long could the downtrend persist?
Predicting an exact timeline is tricky. If trade blocs continue to isolate themselves with tariffs, there is a risk of a prolonged global recession. However, if the trade conflict is resolved, the relief could promptly trigger a surge in stock prices. Much depends on whether US President Trump stays the course or succumbs to a change of direction.
When have similar price crashes occurred earlier?
Severe downturns in the stock market are commonplace. For example, the dotcom bubble burst in 2000. Numerous startups in the internet sector without a viable business model went bankrupt. A lasting recovery followed from early 2003.
This upward motion was stemmed by the collapse of US investment bank Lehman Brothers in autumn 2008. Once again, prices plunged, but a recovery ensued. The onset of the COVID-19 pandemic precipitated the next dip. A recovery followed once more.
Repeating this scenario is by no means certain. Since Trump's trade policy poses a threat to the very foundations of cross-border trade, it could potentially inflict lasting damage.
Which sectors and corporations are most affected?
Initially, there was a severe sell-off among U.S. tech stocks, which had long led the pack. By now, however, hardly any sector remains immune to this downward spiral; tariffs affect all exporters. Some corporations with global production sites, which can thereby bypass tariffs, have fared relatively well in recent days.
Donald Trump* Stock Market Chaos* U.S. Presidency* Global Impact* Stock Market* Stock Market Turmoil* Jürgen Molnar* Selling Pressure* Germany* Trade Wars* EU* Global Economy
(*enrichment data adapted with contextual relevance)
References:
- Federal Reserve
- International Monetary Fund
- World Bank
- Organization for Economic Cooperation and Development
- Given the ongoing trade war between the US and its main trading partners, such as the EU, many experts anticipate that the high tariffs imposed could stifle global economic growth.
- With a bleak stock market sentiment, experts suggest private investors adhere to an age-old stock market axiom: Don't sell in a panic, weather the storm, and wait for better days.
- If US President Donald Trump continues his unpredictable trade policy, the future prospects for stock investors could remain equally erratic, potentially leading to a prolonged global recession.
