US $3 trillion, equivalent to Californias GDP for a whole year.
In an image analogy, Alipay sets five yuan each year to divide up 500 million yuan, and 3 trillion dollars is enough for Alipay to play for more than forty thousand years.
As a result of the one-day decline is too tragic, directly triggered the circuit breaker mechanism, the US stock market suspended trading for 15 minutes.
What does fusing mean?
In fact, the word is quite vivid. In the past, the fuse was made of fine wire. In order to prevent short circuit from lighting the house, when the current is too strong, the fuse will blow.
Simple understanding is a self-protection mechanism.
The so-called circuit breaker mechanism in the stock market means that the stock market as a whole has collapsed too hard.
We are all selling stocks. We have reached a point where we have to suspend trading and calm down.
So, whats the extent of the 23-year-old U.S. stock meltdown? Where does the mechanism of fusing come from? Whats the reason for this fusing?
The first video of hardcore Kanban, I want to show you about the stock market closely related to our life.
01. U.S. stocks plummeted to nearly $3 trillion
Someone has to ask, why do I need to understand the stock market? It has nothing to do with me.
But in fact, the stock market runs through all aspects of our lives. Almost all new trends will leave footprints in the stock market at the beginning of their formation.
The bull market started 11 years ago, which made many people earn a lot of money, but the bear market, though late, has arrived.
It is said that there are no one wants mobile phones all over Wall Street now, because their owners are all in line on the rooftop.
Overnight, wealth shrank. If its you, do you feel bad?
It didnt happen all of a sudden.
Nightmares come with foreboding.
In the first two weeks of February 2020, the Dow started well, with gains of 3% and 1.02% respectively.
When we meet proper nouns, we must explain them first. Its very simple.
Dow Jones index, or Dow for short, usually refers to the Dow Jones Industrial Average (DJIA), which is the sum of the share prices of the 30 largest and most famous listed companies in the United States.
Famous companies like apple, Microsoft and Goldman Sachs are all in the 30.
Although the Dow only involves the stock prices of 30 companies, it is often regarded as the most sensitive index reflecting the stock market changes in the United States, which plays a great role in investors observation of market dynamics.
Just mentioned that the Dow started well in February, but it didnt last long. From the beginning of the third week, the Dow ushered in a dominoed flop.
In the last week at the end of February, it plummeted 12%, the worst weekly performance since the financial crisis.
Since March, the Dow has had a brief rebound, up 1.79%; however, the subsequent decline momentum is even stronger, down 7.79% from the beginning of the second Monday.
At the same time, the S & P 500 index, which records the stock price fluctuations of 500 listed companies in the United States, has a similar trend, except that the stock prices of the 30 most famous companies fluctuate greatly.
Compared with the Dow Jones index, the S & P 500 index contains more companies, which can reflect the broader market changes.
As of March 9, the S & P index has fallen 12%, the biggest decline in nine years.
The collapse wiped out about $3 trillion of wealth.
Fusing has only happened twice in 23 years.
The A-share fuse broke out on January 5, 2016. The actual trading time is 2 hours and 19 minutes, with a total of 4.24 trillion yuan melted down and 508 million yuan evaporated per second.
Originally thought that only a shares have a fuse, why the U.S. shares also have it?
Black Monday, 1987
It all started with Black Monday in 1987.
On Friday, October 16, 1987, the U.S. stock market plummeted 5%.
Leading to the opening Monday, the worlds stock market in panic selling, ushered in the then history of the largest one-day decline.
In the same month, eight of the worlds 23 major markets fell by 20% to 29%, three by 30% to 39%, and three by more than 40%.
On Black Monday, the Hang Seng Index, which reflects the level of Hong Kong stock prices, fell more than 400 points, triggering a historic four-day market close.
The triggering conditions of the fusing mechanism have been adjusted several times.
When the Dow fell 350 points, market trading was suspended for half an hour;
After the resumption of trading, if the Dow falls 200 points again, market trading will be suspended for another hour.
Never thought that the new rules just set up soon, it ushered in a huge test.
On October 27, 1997, three months after the financial crisis in East Asia, the U.S. stock market suffered the first blow in history.
On the same day, the Dow fell 554 points, once again creating the biggest one-day decline in history.
For the first and only time in history, the NYSE closed its trading floor before 4 p.m. est.
However, the triggering standard of this kind of circuit breaker mechanism was immediately questioned by people.
Many people think that with the development of the stock market, the market price has risen a lot, and the number of points the Dow has fallen does not fully reflect the market volatility.
As a result, from April 1998, the trigger rule of the circuit breaker mechanism was changed to the percentage of Dow decline, with quarterly value as the comparison standard.
At the same time, the fusing mechanism is also increased from the previous two levels to the third level, and the occurrence time is also required to be more detailed.
Until February 2013, the circuit breaker rules were revised again, adding three levels of S & P index as the measurement standard.
If it occurs between 9:30 a.m. and 3:25 p.m. ET, the market will suspend trading for 15 minutes.
If it happens after 3:25 p.m., it will not be suspended.
The third level of circuit breaker is a 20% drop, so the trading of stock on that day will be completely terminated.
This kind of rule, in the eyes of outsiders, may have been detailed to the point of insanity.
The U.S. stock meltdown was triggered according to the new rules set in 2013, which is equivalent to cutting a color for the new standard.
03. Why does American stock break this time
So whats the reason for the U.S. stock market to melt this time?
The stock market fluctuation is often due to the abnormal phenomenon in the economic society.
An important factor in this crisis is the sharp drop in the price of crude oil.
On March 6, 2020, Saudi Arabia, as a major member of the organization of Petroleum Exporting Countries (OPEC), proposed to reduce production.
The spread of novel coronavirus has led to a decline in global demand for crude oil. In this way, Saudi Arabia wants to reduce the losses caused by excessive crude oil exploitation.
But Russia refused to cut production.
This negotiation even angered the fighting nation.
Russia is thinking that, in terms of oil production, I would not have been able to compete with Saudi Arabia in the first place. If I cut production again, my market share will be lost. Why?
Saudi Arabia a look, OK, since you do not agree, then give you some color to see.
Saudi Arabia then launched an oil price war on March 7, which sharply lowered the price of crude oil and further increased crude oil production in an attempt to defeat Russia.
Previously, Saudi Arabia produced about 9.7 million barrels of oil a day.
But according to the energy agency, Saudi Arabia can increase production by another 2 million barrels a day, while Kuwait, Iraq and the United Arab Emirates, the other OPEC members, can increase production by 1 million barrels a day.
Obviously, Saudi Arabias goal is only Russia, but the shock brought by the decline of oil price is global.
Take the United States. If the price war between Saudi Arabia and Russia lasts for more than a few weeks, many small oil companies that account for more than 15% of U.S. oil production will face bankruptcy.
Large oil companies will also face severe challenges.
On March 9, in the US, the 10 worst performing stocks in the S & P were all oil producers, all down more than 30%.
Among them, shares of MarathonOil and ApacheCorporation fell more than 40%.
In other countries, Saudi Aramco, Saudi Arabias national oil company, fell 10%, the biggest decline allowed by its stock exchange;
Royal Dutch Shell fell about 17%;
Shares of BP in the UK and total in France also fell.
In addition to oil, the global outbreak of the new coronavirus itself has added a fire to the fuse.
The closure of factories, airports, shops, schools and even the closure of the whole city has left the global economy full of uncertainty.
After the outbreak, the isolation and control measures of various countries have restricted the circulation of production factors such as labor force and raw materials, which greatly affected the normal operation of Global trade.
In short, the global economy is shrinking under the influence of the epidemic.
Uncertainty breeds fear, fear breeds panic.
A series of measures after the spread of the new crown have rapidly boosted investors risk aversion. Panic selling is going on. The Feds emergency policy also failed to prevent the stock price from falling again and again.
In addition to the two main factors of oil and epidemic, the bubble economy has always been a problem, and it is also the behind the curtain of this fusing.
The long-term technological progress and excessive monetary and fiscal policies lead to overcapacity;
With the development of medical technology, the degree of global aging is deepening;
The problem of income imbalance among countries is also growing.
This series of reasons together cause the current global demand downturn.
When the global demand is insufficient, the economic growth lacks the impetus, and the stock market also correspondingly hides the crisis.
Under the superposition of various factors, US stocks once again ushered in the Black Monday, investors also witnessed the history of the second circuit breaker.
After the U.S. stock market melts, the stock market may enter a bear market. Bear markets are not common, but they are often a harbinger of difficult economic times.
After the shooting, there was no winner.
Global cooperation is the only way to overcome difficulties and maintain the stability of the energy market.
A public health crisis has turned into a global stock market shock.