The sudden fall in the stock markets around the world shows no signs of launching after the imposition of US cleaning and wasting tariffs, and many ask that it qualifies as a “disaster” and what can it mean to them?
The word collapse has been used sparingly over the decades and is usually reserved for a decline of over 20% of a recent peak per day or for several days.
On October 19, 1987 – also known as Black Monday – the US stock market lost 23% of its value in a day, and other stock markets had similar falls.
It was definitely a disaster.
In 1929, the US Stock Exchange lost over 20% of its value in two days – and 50% within three weeks. It was the famous Wall Street catastrophe, which introduced into the great depression of the 1930s.
For comparison, the US stock exchange has lost about 17% of its value from its peak in February and is now 2% of the place where it was this time last year.
The United Kingdom Index fell sharply, though not so much.
This is partly because it closes earlier from New York, so it often plays catching up everything that happened in the United States the next morning.
Nevertheless, these are the biggest and rapid downturns we have seen in the world markets, since in early 2020 they were covered by the panic of Covid-19.
A decline of 20% of the peak is considered a “bear market” – a description of a market that seems to be more likely to decrease than to rise. We are very close to this description right now.
While many people have shares and shares directly, exposure to most people in the stock markets comes through their pension plans. There are two types – schemes for defined benefits that guarantee a fixed pension income and a defined installment where your retirement sweat increases and falls with financial markets.
This may sound like certain plans for contributions are very vulnerable to this sale – but not all your contributions come into shares. Much of the money goes into more festive investments such as government bonds. They tend to increase when the stock markets fall as they are regarded as “safe shelter”, along with other assets such as gold.
This is exactly what happened here.
Government bonds have grown in value and this can compensate for some or all shares decline, depending on how your retirement savings are allocated.
The closer you are to retirement, the more the large percentage of your pension court is likely to be invested in bonds -so the less you will be.
There are many falls over the decades of the Wall Street crash, but in the long run the shares turned out to be a good investment – and retirement savings are a long -term game.
It matters. The value of the company's shares is a measure of how profitable these companies are expected to be in the future. The package market is an indication that most people think most companies are likely to see their profits fall.
Markets believe that US President Donald Trump's tariff bombing is expected to raise prices, demand and reduce profits by making companies less valuable and more frequent to reduce investments and jobs.
So the real warning sign here is not about the value of your pension, but about the health of the economy in which we live and work.
It falls like this sometimes, often even, announcing an economic decline. This is a more concern than the value of your pension that you have seen and will see instability like the one over the years.
But this does not mean that this is not a very big moment for the world economy.