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The article analyzes the recent downturn in global financial markets, triggered by escalating trade tensions initiated by former U.S. President Donald Trump, and draws parallels to several significant historical stock market crashes. The author suggests that Trump’s protectionist trade policies, specifically his tariff plans, are responsible for a sharp decline in market value, leading to concerns about a potential global recession. The article highlights the scale of the market losses since the announcement of Trump’s trade policy, with over $5 trillion wiped off global stock markets. The investors are growing increasingly concerned by the Washington's apparent unwillingness to negotiate and calm the situation. The S&P 500 index is approaching bear market territory, characterized by a 20% drop from its most recent peak, indicating the severity of the slump. The article further analyzes how the current situation compares with historical economic crises like the 1929 Wall Street crash, the 1987 Black Monday crash, the 2000 dotcom crash, the 2008 financial crisis, the 2016 Brexit vote, and the 2020 Covid-19 pandemic. In each case, the article provides context and data to illustrate the magnitude and impact of these events on the global financial system. The 1929 Wall Street crash, triggered by speculative share-buying, led to the Great Depression and the second world war. The Dow Jones industrial average fell by 11% on “Black Thursday,” 24 October, which was followed by a 13% fall on the Monday and an 11% tumble a day later. The downward spiral would take until June 1932 to bottom out, by which point the companies on the New York stock exchange had lost 90% of their value. The 1987 'Black Monday' crash was caused by a speculative bubble during the boom and bust 1980s. The Dow Jones recorded its biggest-ever daily fall, with a 22% rout on 19 October. The London market also came crashing down; in a collapse made worse by the closure of the stock exchange on the Friday amid the travel chaos caused by the Great Storm of 1987 – infamously glossed over the previous evening by the BBC weather forecaster Michael Fish. With City traders struggling to return to their desks, and with computer-automated trading adding to the rout, the FTSE 100 fell by 10.8% on the Monday, with a further 12.2% plunge the following day. The dotcom crash in 2000 was caused by the hysteria of the 1990s boom in stock market listings by fast-growth internet companies. Early in the new millennium, the dotcom bubble burst in March 2000, and the 9/11 terrorist attacks in 2001 crashed the index back down to a trough of 3,287 by the time coalition forces were gathering to prepare for the invasion of Iraq in 2003. Investors have drawn parallels with the market exuberance at the end of the last century by highlighting the meteoric rise of the so-called “magnificent seven” group of US tech stocks, and subsequent crash in valuations over recent weeks. Lehman Brothers filed for bankruptcy on 15 September 2008, in the watershed moment of the worst financial crisis of the postwar age. Global markets had been in deep trouble for some time as the credit crunch raged; with its roots in the US sub-prime home loan market. On the day of Lehman’s collapse, the FTSE 100 fell by a relatively limited 4%, but would go on to lose almost a third of its value in 2008 as a result of the global financial crisis. The bank runs, company failures and fears of the international recession it would trigger led to some of the steepest daily losses in trading history, with an almost 9% rout on 10 October marking the height of the chaos. Britain’s shock vote to leave the EU in 2016 sent the pound tumbling to a 31-year low and erased more than $2tn (£1.57tn) of value from global financial markets, with the heaviest losses on the FTSE 100 and European trading hubs. The FTSE 100 collapsed by 8% within the first minutes of opening; but recovered some ground after Mark Carney, the then governor of the Bank of England, promised it would not hesitate to take action to stabilise markets and the economy. The FTSE 100 ended the day down 3.2%. The forced shutdown of the global economy during the health emergency of the Covid pandemic triggered panic in financial markets and the deepest recession since at least the 1930s Great Depression. Major landmarks in the global markets toppled in a matter of hours and days, including more than eight years of gains on the FTSE 100 being wiped out in barely a month, while global stocks had their best and worst sessions in a decade on consecutive days. The FTSE 100 recorded its biggest daily fall since Black Monday, of almost 11%, while the Dow fell by about 13% on 16 March. However, rapid intervention from central banks and governments helped instil a dramatic turnaround.
The comparison with past crises highlights the cyclical nature of economic downturns and the potential for significant market volatility. It emphasizes the interconnectedness of the global financial system and how events in one part of the world can have ripple effects across the globe. The article underscores the importance of understanding these historical precedents to better navigate current economic challenges. For example, the article points to the rapid intervention by central banks and governments to calm financial markets during the COVID-19 pandemic, providing a framework to mitigate the potential adverse effects of Trump's trade policies. The author also subtly criticizes the Trump administration's approach to trade, labeling his trade plan as a “liberation day” tariff plan, which economists deem dangerous, triggering global recession concerns. The article does not explicitly suggest a direct course of action but implies the need for careful consideration of trade policies to prevent further market instability and potential economic consequences. Furthermore, it discusses how the government's responses to financial crises have evolved over time. For instance, while the response to the 1929 Wall Street crash was delayed and insufficient, leading to a prolonged depression, more recent crises, such as the 2008 financial crisis and the COVID-19 pandemic, saw swift and aggressive government intervention, preventing even more catastrophic outcomes. This suggests that a proactive approach to managing economic downturns is essential to protecting financial markets and the broader economy.
In conclusion, the article serves as a cautionary tale, drawing parallels between the current market situation and previous economic crises to highlight the potential risks associated with trade protectionism and market volatility. It suggests that understanding these historical precedents can inform current policy decisions and help mitigate the negative impacts of trade tensions on the global economy. The author also alludes to the importance of international cooperation and diplomatic solutions to avoid triggering a global recession. By pointing to successful interventions in the past, the article suggests that a proactive and collaborative approach is crucial to stabilizing markets and preventing further economic decline. The analysis provided in the article is essential for investors, policymakers, and anyone interested in understanding the complex interplay between trade, financial markets, and the global economy. The ability to learn from past mistakes and successes will be paramount in navigating the current economic challenges and fostering sustainable growth. The author's objective appears to be to provide a comprehensive overview of the current situation in light of historical precedents, emphasizing the need for careful and informed decision-making in the face of economic uncertainty. Through the comparison of various crises, the article highlights the common threads that contribute to market instability and suggests that addressing these underlying issues is essential to preventing future economic downturns. By urging a more thoughtful approach to trade policy and market regulation, the author implies that proactive intervention can help shape the global economic landscape and promote stability and prosperity for all.
Source: How ‘liberation day’ rout compares with other notorious stock market crises