The stock market indices have published recently – but not the type of files that investors. The S&P 500 Friday delivered its worst performance since the start of the pandemic in 2020. And both S&P 500(Snpindex: ^ GSPC) and the Nasdaq(Nasdaqindex: ^ xicic) On March 31, finished its worst quarter since 2022. The Nasdaq even slipped into a lower market last week, represented by declines of at least 20% compared to its last summit. Given all of this, it’s just to say that the market has crashed.
The reason for turmoil? President Trump’s prices on imports. Investors and analysts are concerned about these tasks will weigh on business and economic growth at home – especially after the president has widened his initial tariff plan to include more countries and deeper tax levels. Now the question is: after this market crash, what happens next? History offers us a surprisingly clear answer.
Image source: Getty Images.
First, it is important to note that there is no specific percentage drop which signals a crash on the market, but generally, investors are starting to talk about a crash when the indices decrease by more than 10% fairly quickly – and this is the case for the moment. The NASDAQ slipped by around 10% in last week, the S&P 500 and the industrial average of Dow Jones are close late.
As mentioned, investors are concerned about the impact of Trump’s prices, the direct debits from most countries in the world. Given that American companies – in particular strong growth technological players – import raw materials and finished products, they will have to pay these prices and this represents higher costs for them. They can either absorb these costs or transmit them to the consumer. In one or the other situation, this is likely to weigh on income, the results are higher expenses or less customers.
Now, to understand what could happen after this new crash, consider other high cost periods for companies such as inflation and American recessions. Past periods of higher inflation – like the early 1990s and more recently in 2022 – led to a drop in S&P 500, but the market has not crushed. In fact, in both periods, the index continued to win fairly quickly as inflation has dropped.
^ SPX graphic
^ SPX Data by ycharts
However, market accidents took place around the previous recession periods-from the DOT-COM bubble in 2000 until the 2008 financial crisis and the Coronavirus crash of 2000. The shaded areas of the graph below show periods of recession.
^ SPX graphic
^ SPX Data by ycharts
And here, what is convincing is that the market, after each period of recession, quickly started to follow above. This is particularly the case after the last two recessions. After the 2008 financial crisis, the S&P 500 and the NASDAQ took a positive momentum in January 2009. And after the Krach and the coronavirus recession in March 2000, the actions began to climb a month later.
All this suggests that, in the midst of potentially slower and higher price or price concerns about these problems, the market today can drop – but history shows that the recovery could be on our doors. Thus, a crash does not necessarily mean that the stock market will remain in the slump for a long time. And here is another silver lining in the black cloud: after each slowdown and crash in the past, the indexes have always rebounded and continued to move forward. This means that even if your investments are falling now, it will not necessarily be the situation in a few years.
And this highlights the importance of choosing quality actions and getting involved with them in the long term – I mean a period of at least five years. Many things can change during this period, offering players today to manage the problems and position themselves for a potential victory over time.
So, while you are waiting for all of this to be played, what should you do? If you have the money to invest, plan to buy actions from well -established leaders that are negotiated today at levels of good track. You will find them throughout the industry, but they are particularly obvious in the technology sector at the moment. At the same time, strengthen the positions in dividend actions because they will offer you a much appreciated passive income during this difficult period – and you will like additional income even if the market situation is clearing up.
Finally, during this market accident, keep a fresh head and don’t sell panic. Remember that the market has crashed several times and never stayed down for excessively long periods. Although history shows us that today’s opposite winds can lead to more drops, above all, this also shows us that better times are on the horizon.
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Adria Cimino has no position in the actions mentioned. The Motley Fool has no position in the actions mentioned. The Motley Fool has a policy of disclosure.
The stock market crashed following President Trump’s rates. History says it will happen next. was initially published by the Motley Fool
