By Kaylin Tran
Entertainment Editor
On Feb. 5, the Dow Jones industrial average plunged 2,208 points within one week. This marked it as the greatest decline in history, as the loss was worse than the stock market crash of 1929 and the Great Recession of 2008.
The Dow measures the average of the stocks of 30 large American companies and is used to monitor the stock market’s performance throughout the day.
According to CNBC, the stock market is down more than 10 percent from its previous point and greatly contrasts its previous performance in 2017, which was the first year in history where it showed gains every month.
“The market simply did not take into account that you can’t go up like this for that long,” stated Michael Yoshikami, CEO of Destination Wealth Management, to CNBC.
However, the decline was not caused by a singular event. Yoshikami suspects that it was likely due to investors’ paranoia and speculation about rising interest rates. Earlier that week, the government also announced that average hourly earnings rose about three percent, which triggered a fear of inflation.
Furthermore, the recent decline mirrored the infamous “flash crash” on May 6, 2010. According to The Guardian, within the first several minutes, almost nine percent of the Dow’s value was lost and resulted in a deficit of nearly one trillion dollars from large corporations and companies.
Although many stock indexes collapsed, they rebounded soon after and the market closed only three percent lower than its previous value.
The historic drops in the market appear alarming to many investors, but Marketwatch, a financial information website, stated that if history is anything to go by, the benchmark index usually recovers quickly even after such a large decline.
Marketwatch proved true to its word, as the market has already shown improvement. Stocks rose on Feb. 14 as major indexes were carried higher by banks and tech.
Senior market strategist at LPL Financial stated to CNBC that “It almost looks like the market is realizing the economy is still doing well, [but] there is going to be more volatility ahead.”
Yet, the White House released a statement that expressed the administration’s lack of worry about the matter.
“The president’s focus is on our long-term economic fundamentals, which remain exceptionally strong,” stated press secretary Sarah Huckabee Sanders in the statement. “The president’s tax cuts and regulatory reforms will further enhance the U.S. economy and continue to increase prosperity for the American people.”
