Recent Global Stock Market Crisis Overview

Sep 15, 2024

Global Stock Market Turmoil

Stock Market Crash

  • Worst day for global stock markets in years.
  • US, Europe, Japan stocks declined significantly.
  • VIX index spiked to highest level since early 2020 pandemic, indicating high market volatility.
  • Japan's Topix index dropped 12.2% on Monday, wiping out year-to-date gains.
  • US markets fell almost 8%; Nasdaq down 13% in three days.
  • "Magnificent seven" tech stocks lost $1 trillion in two days.

Causes of Market Crash

  • US jobs report showed unexpected slowdown in hiring.
  • ISM survey: manufacturing economic activity contracted for the fourth month.
  • Soft earnings reports from major companies like Microsoft and Apple.
  • Market concerns about a potential "hard landing" and recession.

Economic Indicators and Concerns

  • Japanese interest rate hike of 25 basis points; highest since 2008.
  • Concern over Japan's weak yen contributing to inflation.
  • Japan's policy changes aimed to spur inflation and address economic issues such as high public debt and weak growth.
  • Japanese stocks and yen affected by global market trends and domestic policy changes.

Market Reactions

  • Rapid yen appreciation led to unwinding of carry trades.
  • Stock market correlation increased sharply, leading to synchronous declines.
  • Tech stocks underperformed; internal sales from high-profile companies.

Long-term Implications

  • Japanese economy: long-term challenges including aging population, low growth, and high public debt.
  • Antitrust issues affecting companies like Alphabet and Apple.
  • Ongoing debate over the impact of AI investments by major tech firms.

Other Market Dynamics

  • US treasury yield curve returned to normal briefly, indicating recession concerns.
  • Sahm Rule triggered by recent unemployment data, suggesting potential recession.
  • US GDP growth at 2.8% in Q2 2024.

Lessons and Perspectives

  • Importance of not panicking during market sell-offs.
  • Potential regime change in economic policies and market dynamics.
  • The behavior of stocks and crypto during high-interest rate periods.

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Note: These notes reflect key points from a lecture on recent market events and economic indicators, providing a summary of the financial landscape and future considerations.