It is threatening to watch “sea of red” dominating the stock market charts and price plummets. Will the market ever recover when it faces a massive and prolong fall?
Historically, given sufficient time, the stock market has shown strength to recover from financial crisis (i.e. in more recent years, 1997 Asian Financial Crisis, 2000 dot-com bubble, 2008 Global Financial Crisis).
It is ingrain in human DNA to prevail over difficulties (i.e. Sept-11 terrorist attack in US, SARS outbreak in Singapore) and come back stronger than before
If we trust history and human’s will to overcome adversaries, so will the fall in stock market gives its way again to a market growth
According to United Nations projection, it is inevitable that world population will rise from 7.3B today to 9.7B in 2050. Increase in populations leads to higher good and service consumption, which drives economy and industries. As an outcome from higher economy confidence, stock market will propel upwards inevitably
After a financial crisis, the bonds becomes an unattractive investment due to its low yield (contributed by lower interest rate from quantitive easing introduced to stimulate economy). Stocks become attractive after their price downfall and stocks valuation will be richer as company demonstrates confidence in earning. Investors will start picking up value stocks over bonds, that offers lower yield rate. Overtime, this will improve the stock market outlook.
Advances of technology such as the internet allows quicker and wider sharing of information, that use to be limited to privileged group of people. Participation in the free market increase, which propels wider and stronger competition. This drives innovation and productivity which again will be reflected in a growth in the stock market.
There will be time to time again when free market is manipulated by greed, which is the root cause of all the financial crisis from tulip-bulb craze in 16th century to the recent global financial meltdown in 2008. Although not guaranteed to avert another crisis, regulatory reform almost always follow after a financial crisis to protect the market from making the same mistake again. However, greed will return with more creative way and the market cycle will restart itself (unfortunately)
What’s your experience in the share market? Leave your comment in the section below