(UnitedVoice.com) – Stock prices around the world continued to drop on Friday, marking five days in a row that the stock market plummeted. The Nasdaq fell by 12.3%, S&P 500 by 13% and Dow Jones fell 14%. On Thursday the Dow had a drastic loss of 1,200 points, making it the worst day ever in history. What’s behind this, and why is it happening?
The coronavirus, also called COVID-19, is a new disease that was first identified in China towards the end of 2019. It has symptoms similar to a common cold, and although it’s obviously contagious, it’s not clear exactly how easily the virus spreads between people.
According to the coronavirus dashboard from Johns Hopkins, at the time of this writing, there have been 85,409 confirmed cases, 39,692 recoveries and 2,933 deaths from COVID-19. Although it was first concentrated in China, it has started showing up in other areas, including the United States, and this is the cause of the recent stock market crash.
In fact, the stock market started experiencing extreme drops after the Centers for Disease Control (CDC) confirmed that the virus had spread in Sacramento, California through community transmission.
Although the majority of the cases are still in China, earlier in the week Iran, South Korea, and Italy started diagnosing new cases of the virus, causing concern that other major economies are going to be affected by the virus as well.
The World Health Organization made a statement on Friday that the coronavirus is now dangerous on a global scale.
Why Is This Happening?
Obviously the virus is something to be concerned about and that the United States should keep an eye on, but why did it cause the stock market to have its worst week in 18 years when only 64 Americans have been diagnosed with the disease?
The main reason is fear.
Fear of what is currently happening, but mostly fear of what could happen.
Manufacturing in China has already been affected. Without the ability to supply products, it’s normal that stocks would go down at least a little, but the major drops didn’t start happening until the virus began spreading in the US.
Once the US had its first case of COVID-19 without a direct causal link back to China, the market started to react. As the world’s largest economy, an outbreak here would mean fewer people working, fewer people shopping and fewer products being made or sold. All of these situations can have a huge negative impact on the stock market, and even though it hasn’t happened yet, the fear that it could happen is enough to prematurely send the US economy into a tailspin.
As of right now, it’s not clear what the immediate or distant future holds in regard to the economy or the spread of the coronavirus. Suggestions are being made that the government should put a healthcare plan into place, the Treasury Department should provide financial support or a stimulus package should be agreed upon.
There are even rumors that the New York Stock Exchange won’t open and that employees might start working from home.
President Trump made it clear during a press conference last week that the United States is going to be fine and that “there’s no reason to be panicked.” Whatever happens in the future, at least we have a great president who will do what’s best for the country.
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