Stock Market Today

What Is The Stock Market

Before we start talking about what is happening on the stock market today, first let’s take a look at what exactly is the stock market. The stock market is a network of economic transactions for the trading of a company, commodity, or any other economic vehicle. The stock market is broken down into stock exchanges. The New York Stock Exchange and the Nasdaq Stock Market are examples of stock exchanges within the U.S. Stock Market. Most developed countries have stock exchanges with the biggest ones being in the U.S., Europe and Asia.

The stock market isn’t just for people with lots of money such as hedge fund managers and institutional investors. The average person can also participate in the stock market and are known as retail investors. There are also many different ways to participate in the stock market such as buying stock of a big name company like Apple or Microsoft, commodities futures such as gold or oil and currency trading in the Forex market. Some of these markets are opened 24 hours a day such as the Forex market.

The origins of the modern day stock market can be traced back to the 13th century when Venetian banks began trading in government securities. Nowadays there are tens of stock markets all around the world.

Stock Market Today

The stock market today is driven significantly by uncertainty. Over the past couple years, a series economic crises have plagued the global market starting in 2008 with the financial crisis in the U.S. It was September 15, 2008, when Lehman Brothers collapsed and the Dow fell 500 points. It wasn’t till about three weeks later that the market took its worst hit. On Monday October 6, 2008 the ‘black week’ started. The Dow Jones Industrial Average fell every day that week and when the smoke had finally cleared, lost 18% of its’ value. On top of this you had the recession, a very high unemployment rate and significant uncertainty around the stability of not only the U.S. economy but the global economy as well.

Since 2008, the U.S. economy has started to claw its way back up and while we still have a high unemployment rate, it is lower. Uncertainty is still king as a new financial crisis has been brewing, this time in Europe. All year long, there has been one thing dominating the news in the market and that is the ongoing sovereign debt crisis in Europe. Inaction from European leaders has only exacerbated the problems and many governments have seen political changes because of it with Italy, Greece and Spain all had either elections or the leaders were forced to resign. The problem in Europe today is much like the one that the U.S. had in 2008 except many economists believe it may be worse. There seems to be no clear consensus on how to solve the problem. While many believe euro bonds would be a good solution, Germany is against this because it would expose their taxpayers to too much bad debt from these countries. Germany has already funded much of the bailouts for Greece, Italy and other countries.

Stocks saw a big rally in late November 2011 after central banks from around the world acted in coordination to add liquidity to the financial system. Central banks from the U.S., Canada, Britain, Japan and Switzerland all acted jointly to lower borrowing rates for banks, giving them easier access. This measure is seen by many as a temporary fix only and believe leaders in Europe need to formulate a plan that will work to solve their debt crisis and quickly.

One thing is for certain, as long as this crisis in Europe continues, uncertainty will rule the markets. This will mean rapid swings from week to week in stock markets worldwide. Will the crisis in Europe threaten to drag the U.S. economy back into recession? Nobody knows, but the markets will react quickly to developments as they occur.