The Stock Market and Confusion of the economic Crisis in 2020
A closer look at the current status of the stock market
The Great Depression leads to unemployment, business closures, poverty, debt, and overall economic hardship. Although The Great Depression ended years ago, there are still several after-effects and instances where similar crises in the economy are noted. Within the last year, many of the signs that were predominant in the great depression began to surface. However, even with the fear of another economic meltdown, things still seem to be kept afloat.
Hello, and welcome to my blog. It is nice of you to join me. In this blog post, I will be discussing the various ways that the world has stayed afloat during the economic situations of the world.
A lot of businesses around the world are suffering, but some are thriving, surprisingly. One of those sectors that have strangely done well for itself is the real estate market. The real estate market around the world, especially in the USA have risen significantly, even with the strain on the economy. A second sector is the business and corporate entities. Many companies around the world have shockingly been able to keep operating. The expectation that the poor economic situation will present a financial challenge to businesses, big, medium, and small has shockingly been dismissed. Absolutely no surge has been recorded around the world on the bankruptcy of companies. On the other hand, a record of decreased bankruptcy claims has been noted around the world.
The stock market has also thrived well within this economic battle. In the last few months, the stock market has seen a steady rise of about 30% in profits and investment. Everything seems to be going on as fine as if the economy was doing excellently well. However, experts have said that we are experiencing an economic situation second only to the great depression. This contradiction is our topic of discussion.
How the economy has stayed safe
Government debts are one of the first global steps that have kept the entire world stable. Experts all over the world have said that the world economy would have experienced a huge crash if this step had not been implemented. So what are governments around the world doing? They are simply borrowing from the world bank to care for their citizens. On record, over 16 trillion dollars have been borrowed by various countries.
This loan, which governments take are shared out in forms of loans again to ministries and financial bodies. In turn, these bodies reach out to businesses and individuals who can then take loans to boost their businesses, employ workers, and expand their production. These loans also directly reach citizens through credit card loans. In a single year alone, the United States has seen an alarming increase in credit card debts. To meet up with the economy, these loans are regularly given and taken out. Another loaning facility enjoyed by citizens is a mortgage. Again in the United States alone, mortgage loans amount to billions of dollars which have been taken out by about 47% of adults in the country. This just means that everyone is in debt, and although for now, this has been absolutely effective in keeping the countries afloat, a time will come when payment will have to be made.
This means that all these that have been able to solve great issues will need to be paid back at some point in time. Some day, countries and their citizens around the world will need to pay back their loans, which has accumulated in less than six months. For the government, this will come in the form of taxes and other fines. The question is, will these countries be able to pay back and remain afloat, or will the countries continue to drown themselves in debt?
How banks affect the stock market?
Central banks around the world have also played a part in keeping the global economy afloat. Although the process is slightly complicated, the result is that trillions of dollars around the world have been printed to help mitigate the falling economy. According to the federal reserve’s guys, this decision, if not implemented, would have seen a massive economic fall around the world. This expected fallout was already in progress and would have been eminent in a year or slightly longer. The economic fall of 2008, which happened between two weeks, actually began falling slowly and steadily two years back.
The final reason when stocks and many other economic industries have survived is because of five big and thriving public companies. In my post ‘sell or hold in the new stock rise’ I spoke on the rise in a certain five companies and how they have impacted the stock market. The economic market has been pushed greatly by these five companies, Google, Amazon, Microsoft, Apple, and Facebook. These companies have succeeded in driving and holding up 20% of the stock market. They are also part of the companies that have benefited and grown during the last few months. Amazon, for one, saw a 17% rise in profits, Apple experienced 4% growth, Microsoft, Facebook, and Google also experienced great growths.
Although these companies are largely controlling the market, it is still not enough to say that the economy can hold tight. Smaller-scale businesses have taken a huge toll during this time, and one could clearly see that there are more small scale businesses in the USA than there are larger companies. So the success of the stock market does not quantify that the overall economy is succeeding. However, these five are not the only companies that have a major hold on the stock market and the economy in general. Companies like Goldman Sachs, Wells Fargo, Vanguard, BlackRock, J.P. Morgan, UBS, and a lot more all have a substantial hold on the market. A company like BlackRock holds over $7 trillion in assets, including shares and investments made on them by average citizens, who have a stronghold on the stock market also.
This generally means that the economy and the ordinary people are kept afloat, and happy as long as companies like BlackRock can remain bullish in the stock market. In conclusion, what all this means is that the economy is not reflective fully on the stock market, the success of big companies does not reflect the success of smaller companies. The greatest of all is that governments debts worldwide are the major reason why the world economy is still afloat. Thank you for staying through this video. If you found it insightful and useful, be sure to share, like, and comment. Do not also forget to subscribe to the channel to get the latest of what I have to offer.
Recommended for further reading:
- Think and Grow Rich! — Napoleon Hill
- Money Master the Game — Tony Robbins
- Money: Know More, Make More, Give More — Rob Moore
- The Finance Book — Stuart Warner
- Intelligent Investor: A Book of Practical Counsel — Benjamin Graham
