After weeks of relative calm on the global spread of the crown hooked financial markets novel for the attention last week and crashed dizzying speed. US stocks lost nearly 12% to $3.5 trillion has been erased exchanged for US actions. It ‘was the worst week for stocks after the financial crisis in October 2008, may get worse. The rapid spread of the virus with the rapid response in several countries combined trip and daily life restrictions represented initially imposing an economic blow to industries such as airlines and tourism and also because the epicenter of the virus in China in the city of Wuhan has started global supply chains that rely on Chinese components. This in itself would not be triggered panic in the market, but markets have been so strong and so stable that they were or-if poised for a so many have said for months. The virus, in addition to his real impact was a game for the financial markets, which were equal to the dry tinder service. The ingredients for a conflagration were there, and all it took was a spark. Sign up for our daily newsletter crown by clicking on this link, and send any tips, leads and [email protected] stories. Market participants argue endlessly about whether stocks and bonds are traded at some mythical “right” price. Before this latest jump were discussing no shortage of voices that stocks were overvalued and that the bonds and interest rates were well kept too low by central banks that have not yet returned to normal more than a decade since the last major financial crisis. Others said, not without reason, that while stock prices are high, historically, they reflect the strong fundamentals: companies like the great leaders of technology from Apple, Amazon, Google and Microsoft has a lot of money making and strong double-digit gains after upbeat topic and so deserves hefty premium in stock prices. No matter what part falls on this eternal gap between bulls and bears on, one thing is indisputable: The markets were almost all in 2019 in a drift upwards with very small movements jerky. Stay up and one thing that modern financial markets do not tend to do for a long time, quiet. It ‘s always been the financial panic and fueled long before our modern world of connectivity through technology and hyper instantaneity there are sudden and sickening of market declines. Today the markets are a strange mix of people and programs, traders and algorithms, large institutions and individuals who are active and passive funds. There are no clear data on how much activity on the financial markets with human decisions with respect to existing programs (algorithms), but reliable estimates of banks like JP Morgan City is actively triggered computerized trading on more than 75% of all trades . These programs, created by hedge funds and managed by large banks and pension funds and asset managers, and now with passive funds, created by the likes of Vanguard caliber and Fidelity, making their way into millions of retirement accounts, do not start based trades only pass as the markets and hence to feed the news of the day on itself when the markets move rapidly downwards begin. Crafts and rapid price movement trigger more trades and against selling crafts and then to buy and then sell more. absent any sudden movements, these programs are more dormant, but the markets are quieter, more hair-trigger these programs. Algorithms based on historical models, such as stocks, bonds and a variety of activities over time and relatively in the past together. Market declines are a constant, and more go without some significant market correction that most algorithms and predictions begin to expect. And so since the last great battle of the end of 2018 came the sale, the entire financial system, a powder keg waiting for a game it was. If it was not for the virus, which otherwise would be something; and once the virus available Available spark increased sales of power on itself, regardless of the underlying cause. The other force in the game is then to take active decisions to real people in the markets, as they consider worst-case scenarios, unrecognizable. This helps explain why it might be the case, so steep and sharp: he had woken up to the possibility of a global pandemic, then try to market participants to calculate the most extreme variants of lost revenue, business lost, supply flights frozen for security in the United States government bonds, decreased activity, met with corporate profits and for how long. As the news got worse in the coming days and weeks, but the markets are probably actually the worst of the virus is to stabilize and improve, because markets in the worst before the worst happens in reality a price. Investors, traders and their computer programs try to incorporate all available information on current prices, and if the future expectations suddenly change for the worse, as they are with the virus, the markets are subject to rapid and confused revaluation. This is what is happening now. It ‘an old saying that markets tend to overshoot when they move up and down, and for the moment, is under the direction. the speed of modern markets given, but a reversal could happen suddenly. There are no guarantees here and no script. historical market behavior suggests this scenario, sale, sale, sale, in anticipation of the worst, and then stabilize and buy long before the worst passages. But the past behavior is only a guide, not a road map. There are no recent past, exactly parallel with the spread moves slow a pandemic, but still quite deadly swine flu in 2009, and not 2008 to 2009 financial panic, let alone the SARS epidemic lower in 2003, before that the rise of algorithmic trading and the intense interconnectedness of global markets. What should not be denied, however, that the markets for a certain type of train are back in balance in light of the very strong fundamentals for most companies whose shares are publicly traded. That should not lead to any sold in the first months of anticipation should have; it is almost impossible to know when this will happen pullback game and prove that the commission of the Fool. it only means that the conditions for a strong and rapid decline were ready long before the virus. It also means that the financial market, while contagion is worse, in fact, is able to get a better almost certainly first and foremost is better. This is not a balm in the real world of people who are sick and dying or economies that see a drastic decline in the short term, but it is an important reminder that markets and the real movement on related but separate tracks. The markets have been hit hard, but also highly functional, equipped with electronic systems have been perfectly worked well for the world generally in front of the virus. That may be small consolation, but it should be something more in a world facing a difficult time. Picture copyright by Johannes Eisele AFP via Getty Images
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