In the past week, the stock market has experienced significant turbulence, with global markets facing severe declines.
In Australia, investors were celebrating as the Australian Stock Exchange (ASX) reached a new record high.
However, since Friday, global stock markets have taken a sharp downturn, erasing $100 billion from the value of Australian shares alone.
On today’s episode of The Briefing, Dr Angela Jackson, Lead Economist at Impact Economics, joined Bension Siebert to discuss why the stock market is crashing and what it means for you.
According to Dr Jackson, the stock market is a crucial indicator of economic health, reflecting the value of publicly traded companies. For many Australians, the stock market impacts their superannuation funds, making recent declines particularly concerning.
“There’s a bit of nervousness out there in the market that perhaps the United States, the Fed Reserve has left interest rates too high for too long and that’s going to impact their economy and may cause a recession,” she said.
Dr Jackson explained that the recent market crash is linked to fears of a potential US recession. The US market experienced its worst day in nearly two years, with the Dow Jones Industrial Average dropping 1,033 points. Meanwhile, Australia’s ASX suffered its worst day since 2020, with over $80 billion wiped off its value.
“So we talk about the narrow path, the idea being that this is a very hard thing to do. Slowing the economy down without having a recession is a really tough gig and not something central banks have really done successfully in the past.”
The global sell-off also impacted markets in Japan, where the Nikkei saw its largest single-day loss ever.
Dr Jackson highlighted that while the current situation is troubling, it is important to understand that market fluctuations are a normal part of investing.
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