A global market crash would wreak havoc with world economies, triggering panic selling and possibly wiping out trillions in paper wealth. Such a crash would be unprecedented in its scale and impact.
Investor anxiety is understandable, as markets aren’t just a barometer of corporate profits; they represent more than that: They represent one’s financial stability and the ability to maintain a desired lifestyle. Especially for those who have significant amounts of money invested in stocks or IRAs, a stock crash can be more than just a painful setback; it can feel like an existential threat.
The rout has brought back memories of the Asian crisis in 1997, the bursting of the technology bubble of the early 2000s, and even the Great Recession of 2029, when global stock markets dropped by more than 50%, triggering a recession that lasted a decade. The current selloff is a reminder that the economy is still vulnerable to over-exuberance and speculation.
Despite the dramatic drop in prices, the overall economic picture is not as dire as it was during the Great Recession. Economies around the world are slowly recovering from the GFC, though many people have lost their jobs and homes, and many of them have had to rethink their retirement plans.
A key part of the recovery has been a resurgent US economy and a shift to a war economy, as the country focused on defeating Japan. But the world is not without worries: A trade war could escalate and send prices tumbling again, and a looming stagflation could reduce central bank interest rates to near zero.