Stock Market Plunges To Unexpected Low

Gelila Negesse , Designer

December 2018 was on track to be the worst December for Wall Street since the Great Depression in 1931, as the S&P 500 and Dow faced the biggest loss in what was expected to be a positive turnout for marketers.

The stock market is a public market where people can buy and sell stocks, which is a piece of ownership of a company. Investors are the people who buy and sell these stocks. The S&P 500, which is the top 500 companies in the U.S., and the Dow Jones, which is the top 30 companies in the U.S., are index funds that are a collection of stocks that mark the health of the economy.

According to Business Insider, both the S&P 500 and Dow fell more than 7 percent, which came as a shocker to marketers who anticipated more stock purchases during December.

“Companies do year-end dividends, which is where they give you stock options as a reward for giving them something,” AP Economics teacher Christopher McMillan said. “A lot of people spend that money to buy more stocks.”

McMillan believes that many investors and companies are waiting for the stock prices to decrease drastically over December.

“When you’re in the economy, you need to buy things when they’re really cheap and sell them really high,” McMillan said. “So when [companies] see things starting to go down they’re gonna wait ‘til it hits rock bottom before they start buying stuff.”

Many events throughout 2018, such as the fading of corporate tax cuts and the U.S and China trade war, which has raised costs for businesses that decreases competition in the U.S, can be to blame for the market hit.

“A tariff, which raises the tax of goods in the U.S., eliminates business competitions [in the U.S], which puts China up against one or two [U.S] companies,” McMillan said. “When everyone wants to buy your product, then you’re gonna push the price up because they know you are gonna need it.”

AP Economics teacher Jason Gray believes that 2018 was a low year in terms of the economy based on the political climate.

“The political instability, such as the government shutdown and immigration, resulted in the country having a lot of conflict and tension,” Gray said. “So the stock market will climb, but then some questions about the future will cause for uncertainty.”

According to McMillan, the economy, however, tends to cycle this way where it fluctuates every year depending on the previous years’ performance.

“When people say, ‘the stock market dropped 10 percent’… you need to look at 2017, where it grew almost 20 percent,” McMillan said. “Over the last two years, it has netted about 10 percent, which is where it should be going.”

Although many news outlets are predicting a better turnout for 2019, the future for the stock market is still uncertain.

“The economy is cyclical. There are ups and downs, so there might be long periods of ups and longer periods of downs,” Gray said. “The real question is if this is a sign of the upcoming year of being a big recession? But it’s not like our current living is coming to an end. It’s just a natural part of the cycle.”

More about the Stock Market:

More about the Stock Market’s December performance: