American stock markets are plummeting and Donald Trump’s economic gains as president have now been completely eradicated, while the other major stock markets around the world aren’t doing any better.
The Coronavirus pandemic is severely affecting economies all over the world and fears are diminishing investor confidence in just about everything (including gold). The economic downturns in the world’s biggest economy, the US, are near unprecedented and drawing parallels between the current situation and the 2007 sub-prime mortgage crisis as well as the Wall Street Crash of 1929 that resulted in the Great Depression.
And it comes as no surprise, with the Dow Jones Industrial Average dropping by another 6.3% on Wednesday, following a 13% drop on Monday. Stock prices are down, with the 30-share index dropping over 7% to completely erase Donald Trump’s $2 trillion economic stimulus package that was an effort to mitigate the devastating blows that the US economy has been enduring ever since the COVID-19 outbreak has been dominating headlines. The S&P 500 has also fallen by more than 7%, which is not good news for the US retirement and savings market. The NASDAQ Composite Index also fell by 4.7% and the New York Stock Exchange is down more than 12%.
While the Federal Reserve made major moves on Tuesday – a $1 trillion emergency plan to unclog credit markets – every step forward was met with another blow sending it right back to where it came from as investor confidence plummets.
Most noteworthy drops for individual companies, naturally, were seen with Boeing Co., who’s stocks fell by more than 17% (more than 70% below its highest price over the last year), while Delta Airlines also cut it’s flight capacities by 70% and cut executive pay. Beyond that, Detroit’s major automobile companies, General Motors, Ford and Chrysler, have announced that they will temporarily shut down all American factories and temporarily close their factories in Mexico and Canada. Furthermore, the National Restaurant Association is predicting $225 billion is sales losses over the next three months.
Along with US property tycoon, Simon Property Group, the biggest mall owner in the country closing down business for the foreseeable future, leading to huge damages to the commercial property market as a whole, oil companies are also suffering. West Texas Intermediate crude fell to it’s lowest level in the last 18 years at $22 a barrel. Even gold prices are tumbling with investors selling their assets to cover their losses. Gold is supposed to be a stable safe haven for investors around the world.
And what’s happening in the US is not unique. Japan’s Nikkei 225 index is down by 1,41% over the last day at the time of writing. The Johannesburg Stock Exchange All Share is down more than 6% and the London Stock Exchange is down by 5,96%.
Senior US economist at Capital Economics, Andrew Hunter has told Al Jazeera that the experts are “penciling in” the possibility of America’s GDP falling by 10%. This not not an insignificant number – it’s just less than $2 trillion. And history tells us a story. In 2007 it told us that when the US economy fails, it hits the rest of the world. The global economic crisis was compounded by Greece’s economic crisis and the Eurozone contagion, but the coronavirus is sweeping across the globe and we are in for something similar, if not worse. That economic crisis defined the economic reality that now defines every millennial’s adult life. Now, Gen Z is facing that same reality, if not something worse, and we will feel the double-whammy of bearing witness to two economic crises in our short lifetimes.