A person who is interested in business, finance, international relations, investing and related areas of expertise may want to know, “What types of global events impact stock markets?” This is important knowledge because markets and economies are not isolated. What happens in one stock market is likely to have a ripple effect on the others around the world.
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Natural Disasters
Natural disasters play a big role in the stability of investment markets around the world. An example is the earthquake that struck off the coast of Japan in March 2011. The earthquake triggered a massive tsunami. The tsunami then severely damaged the Fukushima Daiichi nuclear power facility, resulting in the meltdown of several nuclear reactors. Hundreds of thousands of people were forced to evacuate. No additional nuclear reactors have been built in Japan since, and the country has now returned to coal power plants. This series of event played a big role in a drop of its stock markets.
Disease Outbreaks
Disease outbreaks are another event that can impact a stock market. For example, the current novel coronavirus outbreak that began in December 2019 and is continuing in February 2020 has triggered widespread trading fears in the Chinese markets. Their markets have lost billions of yuan in value, and the government has purchased stock in order to stabilize investments and mitigate losses. As the virus has spread to surrounding nations, investors there are also getting weary of how bad the outbreak could get. If the outbreak turns into a pandemic, more markets could experience a considerable drop in trading volume and value.
Armed Conflict or Threats of Conflict
Threats of conflict and actual conflict also have a considerable effect on markets. People do not want to make investments in companies located in a country that is at risk of internal conflict, such as a military coup or hostile takeover of the government. Investors also do not want the risk of investing in a country’s businesses or markets if that country is either being invaded by another nation or it is making threats or actually fighting with another nation.
Civil Unrest
According to Small Business Chron, civil unrest has a big impact on stock markets around the world. Mass protests could put a halt to production if workers are not doing their jobs. Terrorism and the social uncertainty that surrounds it could also lead to considerable drops in the value of stocks. This was seen at the time of the September 11, 2001 terrorist events in the United States. The NASDAQ, S & P 500 and Dow Jones Industrial Average fell precipitously as the events took place, and the federal government took the rare action of closing the markets for several days. The decline in these American markets triggered declines in the markets of America’s top trading partners, too.
Knowledge of how different worldwide events affect stock markets allows a person to plan for the future and anticipate changes in fortunes. The understanding of the global economy and interactions that stock markets have with each other could also help a person have better success with their investments. Being able to answer, “What types of global events impact stock markets?” could help a person lower their exposure to risk and know when to make a change in their investment portfolio.
