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Because the collapse of the world stock market does not really matter
The actions, which have only recently reached a new record virtually every two days, suddenly seem to be in freefall or at least a very savage journey. The global stock markets collapsed on 5 February, continuing the precipitous decline of the previous week. The Dow Jones industrial average, one of the most followed indices, fell by almost 1,200 points, a loss of 4.6% and the sharpest drop of a point. Moreover, when wealth increases, as when the stock market or the real estate market increases in value, people often spend only a fraction of it. When wealth decreases, many people do not reduce their purchases of dollars in dollars.
Firstly, the stock market often performs very drastic movements over a short period of time and occasionally extreme volatility such as Monday occurs. One of the most famous market falls occurred in 1929, at the beginning of the Great Depression. On October 25, 1929, on Friday, the Dow Jones industrial average closed at 301. The following Monday, dubbed “Black Monday” in the world of commerce, the Dow closed at 260, a decline of 13.5%. It is also important to keep in mind that some people who do not own shares are still influenced by market performance. Pensions and the money stored in retirement accounts suffer the ups and downs of the market, so that the income of some pensioners is affected. About 37% of the shares in the United States UU. They remained in pension accounts in 2015, a sharp increase compared to the recent past. Every three years, the Federal Reserve examines thousands of American families about their finances. The effort is called the Consumer Finance Survey. Their latest data show that only 14% of all US households. UU. They hold shares or ordinary stock funds directly.
Furthermore, the amount of money invested by this selected group of households that own shares directly is rather low. This does not mean that anyone invests socks only a small amount. In recent days, the wealth of a small group has been very successful and the richest has lost about $ 250 billion since last week. However, changes in future pension income generally do not affect current expenses. In addition, some people have options to buy their company’s shares in the future. So if you’re one of those 14 percent, Warren Buffet, for example, you care a lot, lost $ 5.1 billion on February 5th.
What this means is that the next time you hear that the stock market has set a new record low, or even a record, you know it only affects a small percentage of Americans. Among the families directly concerned, it is likely that the average will change their spending habits slightly. Jeff Bezos of Amazon, for example, will hardly change his lifestyle just because he lost $ 3.26 billion in one day, as there is still $ 116 billion left. Finally, a fall today does not rule out a dramatic increase in the future. Crater stocks are excellent news.
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