Stock Market Looking Just Like It Did Before The Great Depression?

By Joseph Farago | 1 month ago

stock market

Investors have been worried for quite some time that the current stock market situation will lead to a disastrous outcome. While it has a long way to go before hitting rock bottom, its figures resemble what the stock market looked like almost 100 years ago. This past week, the DOW, also known as the Dow Jones Industrial Average, hit its lowest streak since the Great Depression.

On Friday, the stock market selloff paused, leaving the final DOW figure nine points higher than previously. But the DOW ended the week 3% lower than its last week, still showing a steady decline. This has been the eighth consecutive week of losses for the industrial average, which has been the longest streak since 1923. The figure showcases the stock market’s general insecurity due to investor fear of rising inflation.

The Federal Reserve has made it an unrelenting goal to fight inflation in 2022. It has skyrocketed interest rates, causing panic amongst investors as goods’ costs accelerate while the stock market plummets. Executives on Wall Street are frantically selling their shares to conserve their money before stocks monetarily plunge. With continuous interest rate bumps from the Federal Reserve, it’ll take a while before inflation finally stabilizes.

The S&P 500 is also tanking alongside the stock market devaluation. The index examines the stock value of the largest 500 companies on the market, tracking the peaks and falls of the combined profit margins. The S&P 500 is on its seventh consecutive week of losses, which is the longest stretch of decline since 2001. This is an unfortunate turn of events for the index, which reached a peak number in January 2022. Now, the figure shows that the overall market value for these 500 companies has dropped by 20% since its apex earlier this year.

Ryan Detrick, an analyst at LPL Financial, explained that the S&P 500 figure isn’t solely due to the Federal Reserve fighting inflation. Detrick explained that everything from “inflation, to a hawkish Fed, to war, to supply chain issues” has tampered with many companies’ yearly profits. The pandemic catalyzed a domino effect for most industries in America that struggled with staffing shortages and supply chain disruptions before geopolitical turmoil began in Ukraine. The combined catastrophes have damaged companies globally, which ultimately left the United States stock market in a consistent financial descenscion.

Though the stock market’s reported DOW has constantly been plummeting, many expect the market values to make a resurgence in summertime or fall. Like most things, the stock market ebbs and flows, and even though it experiences enormous lows, it can eventually bounce back. As the Federal Reserve continues to put pressure on the inflation rate, it’ll hopefully stabilize soon to create better economic opportunities for investors. Incentivizing executives to put money back into stocks will ultimately revamp the stock market’s current state. This can only happen when the market’s risk potential lessens for investors. The stock market is an untameable beast that many rely on for financial stability. As long as inflation continues to rise, the stock market index will continue showcasing abysmal outcomes.