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Here's Why Everyone Is Panicking About The Stock Market Right Now

Short answer: Everything is connected.

Originally posted on
Updated on

Americans woke to news on Monday that the ~stock market~ — that enigma that somehow controls their lives but nobody really understands — was tanking. The initial reaction from pundits and market watchers was understandable.

Monday's action is tied to China, the second-largest economy in the world. China's constant growth has fueled higher prices of things like copper and oil, and its export market's size has directly affected the movement of the global economy.

But China has been experiencing a very rough summer, filled with the government pumping money into the system, devaluing its currency to make Chinese goods more competitive, and generally trying to stave off an economic slowdown.

That all came to a head today in what's being called "Black Monday." Chinese investors sold off enough of their stocks to drive the value of China's Shanghai Composite down more than 8% — the biggest one-day drop for the market since 2007.

And the shudder in the Chinese markets has triggered corresponding drops in other stock markets: Japan’s Nikkei 225 was down over 4%, the UK’s FTSE 100 closed down almost more than 4.5% and Europe Stoxx 600 was down more than 5%.

The combined onslaught overseas caused the Dow Jones Industrial Average (an average of 30 major U.S. industrial companies and considered a general indicator of U.S. economic health) to open more than 1,000 points down.

Since then, though, the Dow Jones rebounded to be only about 300-odd points down, before ending the day down 586 points.

Buena Vista Pictures

While that's not exactly great, given how bad things were looking when the NYSE opened, they could have been much worse. The S&P 500 (another index of U.S. companies' prices) and the NASDAQ were also still down at market close, but it was overall a far less bloody day than was initially feared.

This all points to the U.S. market entering what's known as a "correction" period — a time when really high stock market numbers stop going up and get brought back down to more manageable numbers. This happens every few years and we've all survived.

So while the U.S. market decline is sharp, it doesn't compare to the huge crash that launched the Great Recession in 2008, as this 10-year chart of the S&P 500 shows.

The stock market plunge, in perspective. (10-year chart.)

In sum, no matter what you might hear on cable news today, now is probably a bad time to head for your shelter and start training for the Thunderdome.

View this video on YouTube

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Please do not actually feast on the goo of your neighbor's skulls.

Hayes Brown is a world news editor and reporter for BuzzFeed News and is based in New York.

Contact Hayes Brown at hayes.brown@buzzfeed.com.

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