Market Fluctuations (2)
Capital is the tools needed to produce things of value out of raw materials. This high volume tell us that the extremely huge number of investors left the market, yet we have some group of other investors who was buying in that period at small bargain price – some traders decided to satisfy demands of those who were leaving the stock market in panic.
Despite fears of a repeat of the 1930s Depression, the market rallied immediately after the crash, posting a record one-day gain of 102.27 the very next day and 186.64 points on Thursday October 22. It took only two years for the Dow to recover completely; by September 1989, the market had regained all of the value it had lost in the 1987 crash.
In 2008, the failure of some financial institutions in the United States lead to a global crisis that resulted in the failures of some European banks and sharp declines in the global stock market. That’s because when the stock market started falling, brokers suddenly called in their loans.
Demand for goods declined because people felt poor because of their losses in the stock market. Bear markets are a period where declining stock prices occur over a period of time, sometimes months or years. The New York Stock Exchange also make sure that this would never happen again by implementing the uptick rule. The average NYSE trading volume in period from the middle of September 2007 until now is about 7 billion shares per day. They have happened in every part of the world where there was an industrialized market economy.
Unfortunately for them, beginning in September 1929, the stock market began to decline in value as larger investors realized that the stocks were inflated in price. When it happened depends on the current political and economical factors affecting the stock market and how fast the investor could be reassured in the coming stability. Prior to the Great Stock Market Crash, the United States was enjoying a sustained period of economic growth. Many investors became convinced that stocks were a sure thing and borrowed heavily to invest more money in the market. The government decided to take preventive measures for the future to avoid a recurrence of a similar crash. Some countries put a temporary halt to their stock market trading because of this global financial crisis. This was short lived and it crashed again entering a bear market and reaching its lowest point in July of 1932. Many companies and banks also turned to the stock markets for their investments.