Global financial markets are in the middle of a perfect storm, with oil crashing below $30 a barrel and US stocks experiencing their greatest plunge since the epic Black Monday crash in 1987.
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Both the S&P 500 and Nasdaq Composite dropped by about 12%. The Dow plummeted almost 3,000, or nearly 13 percent. Stocks tripped a circuit breaker that halted trading at the New York open on Monday, despite this weekend’s emergency cut in interest rates to nearly zero by the Federal Reserve.
President Donald Trump warned of a possible recession, adding to investor fears with coronavirus economic instability possibly spreading into the summer. Governments are closing borders and cancelling flights, hammering fuel demand and contributing to the biggest decrease in US gasoline prices since 2005.
Analysts at DeskTrading have already pointed out that there are strong signals of a potential long-term global recession and this presents interesting scenarios to investors. The global financial markets crash of 2008 still rings a bell in the minds of many stock market investors and looking at the current climate, there are signs that another great economic recession is long overdue and investors should be prepared well this time around.
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In the US, which is the home to the world’s largest financial markets, stocks are generally seen as low risk investments. However, in the event of an economic crash, they are often among the worst forms of investing as most investors invest long, and barely short the market because of maintenance margins and other factors.
The current drop is so sharp that investors think it could get worse before it gets any better, which means it could be a while before long positions become a viable investment option.
Contrary to stocks, in the global currency market traders can trade various currencies either direction without worrying much about any charges. From a trader’s perspective, this could be a perfect time to look at the Forex market. Some brokers have also introduced CFDs, which allow trading stocks and indices in a similar manner.
In the FX market, it does not matter what the direction of the market is, and this is one of the reasons that make trading FX instruments during highly volatile market conditions attractive to all types of investors.
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