Prices remain steady and predictable and investors are confident in the market remaining steady. Markets respond to changes in the economy and a major change in the economy often results in major shifts in the stock market. Market crashes are precipitate by something occurring within the economy or war (or the threat of war). The stock market (New York Stock Exchange) responds to changes by gaining value or losing value. Markets losing value are not good. Changes in the economy can be real or perceived (the belief that something bad is going to happen).
The NYSE (New York Stock Exchange) has responded in the past to changes (some perceived, some real) in the economic environment. Careful study of the stock markets since 1900 shows several events that affected the markets. Crashes in the market were swift and often lasted more than a year before the markets recovered. The most recent stock market crash was from January of 2000 to October 2002. During this time frame the markets were affected by the bursting of the 'tech bubble'. A lot of small '.com' start-ups went out of business and their investors incurred great losses. Also, during this time frame the twin towers were toppled by a terrorist attack (September 11th 2001). The instability this caused was reflected in market performance. The market dropped 37.8% before it recovered.
According to Brenda Spotten, Associate Professor ...Show more