Stock Market Precipice

On Thur, 2/27/2020, the stock market fell 1191 points, bringing the total decline in the DOW to over 3000 points in one week.

There are several large, looming problems with this. The decline itself is not as much of an issue as one may imagine.

The biggest problem with the decline is how people are likely to react to it. If the market declines by 1000 points, people take notice. Yet the market has the capacity to regain that much in a day or two. When the market declines 2000 points in a week, people get nervous. When the market declines 3000 points in one week, people take action. This is where things get scary.

Beyond a 3000 point drop, if the market falls 4000 points, people panic. However, this is what is most likely to occur because of the actions people began taking at the 3000 point mark. Once panic sets in, even small stockholders will begin liquidating their investments out of fear that they will lose everything. This is the point where early withdrawal penalty means very little with retirement accounts.

Once investors start selling off their holdings to move them into something safer, that process will accelerate.

The other problem is that this truly reveals how tenuous the stock market and the economy itself truly has been all along. For over a year the media has been stating how strong the economy is, while those who pay attention have know just how much of a farce that statement has been all along. This strips away the illusion and shows the truth for all…