The 1933/38 phenomenon – the USA’s biggest market slump and surge

Because of the coronavirus pandemic, the stock market struggled a lot. But recently, it has come back almost as fast as it sold off in the middle of the pandemic. This does not mean that the challenges are all gone. In reality, the chance for another struggle might be very high. However, according to market experts, stock investors do not have to be worried whatsoever.

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As experts have said, this is no time for panicking, and selling all the stocks you own could result in even bigger losses. According to some of the most knowledgeable experts in the field, when everything feels very risky, that is where stock investors have the most potential of success.

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Coronavirus pandemic effect on stocks

The ongoing pandemic had a huge impact on investors and the world of stocks in general. Many people lost a lot of money because of the ever-changing prices, and everything seemed to be very scary.

The pandemic affected every single field of investment. The market suffered a lot; almost all fields of the finance world were affected by the virus. Because of all of these impacts, at the beginning of the pandemic, the U.S. dollar index reached a three-year-high. This happened because many investors were worried about the global outbreak of the virus and decided to move their money into the safe-haven greenback.

For forex traders, it was a good time to invest in the dollar. In recent months, even more people started trading the USD. However, the economic shock from COVID-19 led to most investors losing their money.

What happened in the stock market?

As the coronavirus pandemic hit hard, the stocks of many companies fell very hard. The S&P 500, which is an index that measures the stock performance of the biggest companies in the U.S., fell 34% between February and March. In the history of the stock market, it may be one of the fastest declines ever. However, although these several weeks were very hard, those hard times were followed by the best days for the S&P 500. It was actually able to erase all of its recent losses, with the stock index going up 38%.

During this period, millions of U.S. citizens were left without jobs and were filing for unemployment benefits. This situation shows that even if there are huge losses in the economy, the market still has a chance to overcome these challenges.

Investors and speculators

As different states started to reopen their economies, the market climbed higher because of how fast the economies were reopening. This gave them the hope that consumers would start spending again, and it would increase profits in the end.

However, there are risks to this idea. For example, if a second wave of COVID-19 hits, states will have to develop new regulations once again. Many health officials actually have said that the huge number of nationwide protests after the death of George Floyd could help the virus spread.

Further, if Congress does not work on additional financial relief measures, there will be other challenges as well. They include larger unemployment payments or other one-time stimulus checks.

But as experts are saying, the next selloff will happen from something that cannot be predicted as of now. However, this does not mean that investors should be scared. In reality, long-time investors should continue what they do. Experts say you should not be speculating because you are basically flipping coins, so the best way to continue is to be an investor and not a speculator.

Investors should not be worried

As many experts are saying, even if things go wrong again, investors have nothing to worry about. The thing is that even if the market has huge challenges, there are always ways to overcome it.

According to some of the most knowledgeable people in the market, investors are more likely to get huge profits when the situation is risky. Thus, if you are an investor, do not be afraid to take risks and go on with your everyday life just like you used to.

The market is ever-changing, and the best thing to do is to learn how to adapt to the market. Once you have done that, you do not have anything to worry about, especially when there are examples like the S&P 500. Although there were huge challenges that many thought would have been very hard to overcome, it once again proved that if the right steps are taken, every situation can be overcome.

During the coronavirus pandemic, the U.S. stock market lost as much as 34%, but at the same time, it was followed by a 50-day rally.

There still are some risks of the situation worsening; for example, a second wave of the coronavirus outbreak which could end in another deep selloff. However, as we have already said, long-term investors do not have anything to worry about. The only thing they should do is to stay the course or risk leaving a lot of money behind.