As the stock market has convulsed lower and yields for bonds have surged in recent weeks, culminating in a so-called correction for the Nasdaq Composite Index, average Americans are wondering what’s amiss with Wall Street.
Increasingly, Google searches have been focused on the state of the market (and the economy), and for a good reason.
The Dow Jones Industrial Average
posted its worst weekly loss since October of 2020 and the S&P 500
and Nasdaq Composite
logged their worst weekly percentage drops since March 20, 2020, according to Dow Jones Market Data shows.
Read: The Federal Reserve’s first meeting of 2022 looms as risk of inflation outside of policy makers’ control builds
Searches on Google featured the following popular queries: Is the market crashing? And why is the market crashing?
What is a market crash?
To be sure, the market isn’t crashing inasmuch as the term “crashing” is even a quantifiable market condition. Declines in stocks and other assets are sometimes described in hyperbolic terms that offer little real substance about the significance of the move.
There is no precise definition for a “crash” but it is usually described in terms of time, suddenness, and/or by severity.
Jay Hatfield, chief investment officer at Infrastructure Capital Management, on Saturday told MarketWatch that he might characterize a crash as a decline in an asset of at least 50%, which could happen swiftly or over a year, but acknowledged that the term is sometimes used too loosely to describe run-of-the-mill downturns. He saw bitcoin’s
move as a crash, for example.
He said the overall equity market’s current slump didn’t meet his crash definition, in any regard, but did say stocks were in a fragile state.
“It’s not crashing but it is very weak,” Hatfield said.
Equity benchmarks are being substantially recalibrated from lofty heights as the economy heads into a…