Gen Z is going to have a hard time getting rich

gen z
Gen Z is set to make less money on stocks and bonds.

  • Gen Z will earn a third less on stock and bond investments than past generations, Credit Suisse found.
  • They can expect average annualized returns of just 2%, according to the bank’s investment returns yearbook.
  • Another obstacle for Gen Z: they’ve been the most unemployed during the pandemic.
  • See more stories on Insider’s business page.

Gen Z is walking a rocky road to getting rich.

They’re set to earn less than previous generations on stocks and bonds, according to Credit Suisse’s global investment returns yearbook.

In fact, the generation can expect average annual real returns of just 2% on their investment portfolios – a third less than the 5%-plus real returns that millennials, Gen X, and baby boomers have seen. Credit Suisse’s analysis took in average investment returns since 1900 and forecasted them going forward for Gen Z.

The yearbook acknowledges that marked deflation could increase bond returns, The Economist reported, but it said inflation is more of a concern. What the report calls a “low-return world” is yet another another financial obstacle for the generation, who may be on track to repeat millennials’ money problems.

A December Bank of America Research report called “OK Zoomer” found that the pandemic will impact Gen Z’s financial and professional future in the same way that the Great Recession did for millennials.

“Like the financial crisis in 2008 to 2009 for millennials, Covid will challenge and impede Gen Z’s career and earning potential,” the report reads, adding that a significant portion of Gen Z is entering adulthood in the midst of a recession, just as a cohort of millennials did. “Like a decade ago, the economic cost of this recession is likely to hit the youngest and least experienced generation the most.”

Gen Z was hit hardest in the workforce

Gen Z been been impacted the most in the workforce, facing the highest unemployment rates.

They entered a job market crippled by a 14.7% unemployment rate in May – greater than the 10% unemployment rate the Great Recession saw at its 2009 peak. Those ages 20 to 24 had an unemployment rate of nearly 27% when the unemployment peaked last April according to data from the St. Louis Fed, more than any other generation.

Recessions typically hit younger workers hardest in the short-term, but can reap long-term consequences.

“The way a recession can really hurt people just starting out can have lasting effects,” Heidi Shierholz, a senior economist and the director of policy at the Economic Policy Institute, previously told Insider. “There’s a lot of evidence that the first postgrad job you get sets the stage in some important way for later.”

Recession graduates typically see stagnated wages that can last up to 15 years, Stanford research shows. That was the case for the oldest millennials graduating into the Great Recession, who in 2016 saw wealth levels 34% lower than that of previous generations at the same age, per the St. Louis Fed.

A follow-up study showed that by 2019, this cohort had narrowed that wealth deficit down to 11%. Such financial catch-up could be an optimistic sign for Gen Z in terms of regaining any ground lost building wealth during the pandemic.

However, millennials have had a 5%-plus annualized investment return on their side. With a projected 2% annual return for Gen Z, building wealth may be even harder to do.

There’s more to building wealth

Of course, stocks and bonds are just two asset classes. There are other ways Gen Z can build wealth, such as investing in real estate or by becoming successful entrepreneurs. Many Gen Zers have already embarked on an entrepreneurial path as early as their teen years, which could go a long way in wealth creation.

But the pandemic has caused a housing frenzy that led to depleted inventory and inflated housing prices, making it more difficult to buy real estate – and build wealth through it. And while more prospective new businesses were formed in 2020 than ever before, almost a third of existing small businesses were wiped out by the pandemic. Altogether, the pandemic could ultimately cause Gen Z to potentially lose $10 trillion in earnings.

Within the next decade, Gen Z’s income will rise to such a point that they’ll effectively take over the economy, but their wealth could well be far behind previous generations by the time they get there.

Read the original article on Business Insider

Billionaire investor Howard Marks touts value stocks, trumpets high-quality growth stocks, and says he’s open-minded about bitcoin in a new interview. Here are the 9 best quotes.

Howard Marks
Howard Marks.

  • Howard Marks trumpeted value stocks and high-quality growth stocks.
  • The Oaktree chief is bearish on bonds and bullish on US economic growth.
  • Marks is keeping an open mind on bitcoin’s value.
  • See more stories on Insider’s business page.

Billionaire investor Howard Marks touted pandemic-hit stocks as potential bargains, suggested growth stocks could serve as hedges against inflation, and said he was open-minded about bitcoin in a CNBC interview this week.

The Oaktree Capital Management co-chairman also dismissed bonds, argued the US economy has begun a new growth cycle, and underscored the difficulty of finding distressed assets with so much federal aid and liquidity in markets.

Here are Marks’ 9 best quotes from the interview, lightly edited and condensed for clarity:

1. “I’m never positive about anything.”

2. “The most opportunity is always found in the things other people are ignoring.”

3. “If you can find companies that have been penalized for their difficulties in the pandemic and the penalty was overdone and the difficulties are temporary, I think that’s a good sector right now.”

4. “Any company that has difficulties in this environment deserves to be distressed. The bailouts have been generous, the liquidity has been rife, and the default rate in 2020, which was predicted to get into middle teens, didn’t even reach half that.”

5. “Bonds may be fairly valued relative to stocks, but with yields of 1%, 2%, 3%, it’s hard to justify inclusion in portfolios. Nobody thinks they’re going to get the returns they need in the institutional realm just from stocks and bonds.” – arguing a portfolio split of 60% stocks and 40% bonds doesn’t do the job currently, and alternative assets are needed.

6. “We expect that there will be a recession once in a while. I believe last year’s recession was that recession for that cycle, and that we have commenced a new upcycle.”

7. “The fear is of an overheated economy that produces inflation and thus, calls for higher interest rates. I think that the great tech stocks, the great growth stocks, can offset inflation through their growth, but you have to pick the right ones.”

8. “I’m opening my mind on bitcoin. I was ‘knee-jerk’ skeptical.”

9. “While bitcoin doesn’t have an intrinsic value, the same can be said of the dollar and many, many other things that have value like paintings and diamonds. I’ve been more sensitized to the supply-demand case.”

Read the original article on Business Insider

Americans with more education are optimistic about the economy. The rest aren’t.

nevada las vegas coronavirus unemployment
Entertainment and events have come to a halt during the COVID-19 pandemic, highly impacting Las Vegas’ work force.

  • A Morning Consult analysis looked at consumer confidence throughout the pandemic.
  • It has a K shape like the wider recovery, with more educated Americans more confident about work.
  • The new stimulus could change this K shape, but may not solve things like delayed rent payments.
  • See more stories on Insider’s business page.

As the coronavirus pandemic disrupted life throughout 2020, economists debated the shape of the recovery from it. Would it be a V shape, a U shape, or even an L shape?

The answer that emerged was something different: A K shape, in which the well off recover like they’re in a V, and lower-income Americans never recover at all. President Joe Biden validated the diagnosis back in 2020, on stage during a presidential debate.

It stands to reason, therefore, that consumer confidence would follow the same K shape, but the results are nevertheless striking. A new analysis from Morning Consult, looking at consumer confidence throughout the pandemic, found lower-income Americans’ confidence in the economy dropped and stayed low during a slow rebound. Meanwhile, higher-educated Americans confidence rebounded like a V and continued to grow. In every state, people with bachelor’s degrees earn more than people without bachelor’s degrees.

John Leer, an economist at Morning Consult and the author of the analysis, told Insider that over the summer, people with bachelor’s degrees felt more confident that in their ability to hold onto their jobs and not lose pay.

The story was the opposite for others. At that point, Leer said, there’s a “real realization among lower-income workers that while they may have been able to hold onto their job to date, they’re much more likely to suffer a loss of pay or income sometime in the future.”

That divide only grew more K-shaped as the pandemic continued. A few months later, Leer said, those higher-educated workers’ confidence in their ability to hold onto their jobs translated into a willingness to engage in wage bargaining; they pushed for increases in their pay and benefits.

“The exact opposite” was true for lower-income Americans.

“If they had managed to hold onto a job, they certainly were not in a position to ask for an increase in salary or benefits,” Leer said.

He added: “What you see over the course of the past year is a really strong divergence in the degree to which Americans exhibit confidence in the economy, in their own personal finances, based on their level of education.”

K shape persists throughout rounds of stimulus

While the size of the first stimulus was “appropriate,” some snags with the rollout impacted confidence. Leer said lower-income Americans were less likely to have bank accounts or to have filed taxes in 2019 – meaning it took longer for the IRS to distribute money to them.

There was a similar phenomenon with states’ unemployment programs and getting money to unemployed workers, Leer said; Insider’s Allana Akhtar and Nick Lichtenberg reported that 35 different states ran into difficulties getting unemployment insurance to their jobless residents.

“As a result, we actually see confidence among those people with higher incomes rebounding a lot faster, because they were both more likely to receive the money they were due sooner, and, in addition, they were more likely to be employed in sectors that rebounded faster,” Leer said.

Notably, checks went out faster with the second stimulus, and confidence and spending grew – although higher-income Americans already had elevated levels of confidence.

“I view the recovery plan essentially as a lifeline for folks who are really struggling right now to make ends meet,” Leer said.

Prior research from Morning Consult found that the $1,400 stimulus checks in the $1.9 trillion stimulus package could help 22.6 million Americans pay their bills through July.

But when it comes to the K-shaped recovery, we’ll probably get a sense of how that’s playing out in September or October, according to Leer; it’ll mostly depend on what job recovery looks like.

“The gap in the so-called K-shaped recovery will depend on getting lower income and less well-educated workers back to work,” Leer said.

There’s also broader issues around what Leer calls “deferred liabilities” – the rent and mortgage payments that millions of Americans haven’t been able to pay over the past year. While the American Rescue Plan does offer billions in housing assistance, some progressives are saying it’s not enough to close the gap. Rep. Ilhan Omar of Minnesota just introduced the Rent and Mortgage Cancellation Act; she said that, currently, 12 million Americans owe $6,000 in back-rent on average.

To address this, Leer says “we have to be very honest with ourselves.” He said he would take an approach similar to a financial institution with someone who can’t pay back their debt.

“You’ve got to make some sort of calculated decision as to whether or not it’s reasonable to ask somebody to pay back what they owe,” Leer said. There could be families, he said, who haven’t been able to pay their rent for 12 months – and may not be able to for the whole pandemic.

“That sort of debt overhang is gonna slow down the recovery going forward. And I would hope that we as a country come up with some sort of solution to that.”

Read the original article on Business Insider

The coronavirus recession is almost over, Wall Street strategists say

Wall Street Coronavirus
New York Stock Exchange.

  • Wall Street strategists are increasingly optimistic that the pandemic is in its final phase.
  • JPMorgan said in February the crisis will “effectively end” in 40 to 70 days.
  • The “recession is effectively over,” Morgan Stanley said Sunday.
  • Visit the Business section of Insider for more stories.

One year after the S&P 500 tumbled nearly 8% on COVID-19 fears, experts on Wall Street see the US bearing down on the finish line of the pandemic.

Declining case counts, vaccine rollouts, and expectations for new stimulus have lifted spirits in recent weeks. Economists have upgraded growth forecasts and investors continue to shift cash from defensive investments to riskier assets more likely to outperform during a rebound. Major banks’ strategists are taking it one step further.

The rapidly improving backdrop and “spectacular” profit growth in the fourth quarter signal “the recession is effectively over,” Michael Wilson, chief investment officer at Morgan Stanley, said Sunday.

“At the current pace of vaccinations and with spring weather right around the corner, several health experts are talking about herd immunity by April,” he said in a note. “It’s hard not to imagine an economy that’s on fire later this year.”

JPMorgan made a similarly bullish claim late last month, telling clients it doesn’t expect new COVID-19 strains to dent its positive outlook. The spread of new variants is still overshadowed by the broader decline in cases, the team led by Marko Kolanovic, chief global markets strategist at JPMorgan, said.

The rate of vaccination implies the pandemic will “effectively end” in the next 40 to 70 days, they added.

To be sure, there’s plenty of progress to make before the pandemic is no longer a public health threat. The US reported 98,513 new COVID-19 cases on Monday, lifting the seven-day moving average to 64,722, according to The New York Times.

And while the country is averaging 2.17 million vaccine administrations per day, reaching herd immunity at the current rate would still take roughly six months, according to Bloomberg data, which gauges how quickly the US can vaccinate 75% of its population.

Herd immunity is widely considered the most effective way to defeat COVID-19. Yet Wall Street’s more bullish forecasts suggest a mix of vaccinations and continued precautions could crush the virus in a matter of weeks.

Officials have warned that, while accelerated growth is on the horizon, there’s work to be done before the US stages a complete recovery. Reopening and new stimulus may fuel a sharp increase in inflation, but such a jump will likely be short-lived and fail to meet the Federal Reserve’s target, Fed chair Jerome Powell said Thursday.

The labor market also has “a lot of ground to cover” before reaching the central bank’s goal of maximum employment, Powell added. The chair indicated that, along with a lower unemployment rate, the Fed would need to see improved wage growth and labor-force participation before tightening ultra-easy monetary conditions.

Others are more optimistic. Treasury Secretary Janet Yellen said Monday that the $1.9 stimulus package nearing a final House vote can “fuel a very strong economic recovery.”

“I’m anticipating, if all goes well, that our economy will be back to full employment – where we were before the pandemic – next year,” Yellen said in an interview with MSNBC.

Read the original article on Business Insider

Don’t be fooled by the jobs report, the Federal Reserve isn’t hiking interest rates any time soon

fed chair jerome powell
Federal Reserve Chair Jerome Powell prepares to speak during a House Financial Services Committee hearing on Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response in the Rayburn House Office Building on December 2, 2020 in Washington, DC.

  • The jobs report was strong, but the US economy has a long way to go to bounce back from the COVID crisis.
  • This means the Federal Reserve isn’t going to ease up on its crisis measures anytime soon, and it certainly won’t raise interest rates.
  • Just listen to Fed Chairman Jerome Powell, he’s going to let the job market run hot. 
  • George Pearkes is the global macro strategist for Bespoke Investment Group.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit the Business section of Insider for more stories.

Today’s jobs report from the Bureau of Labor Statistics was good news for the US economy, with businesses reporting 349,000 jobs added in February. But that good news, while welcome, is unlikely to mean anything for Federal Reserve policymakers, who have bigger plans for the labor market than a few strong jobs report numbers.

In a Q&A with the Wall Street Journal yesterday, Fed Chair Jerome Powell outlined the central bank’s areas of focus for the economy. In keeping with the changes to their long-term goals updated last year, the Fed’s labor market target is now “maximum employment”, which officials admit is “a broad-based and inclusive goal that is not directly measurable.” 

Instead of focusing on a single number like the unemployment rate or attempting to keep employment at a level that doesn’t create a risk of inflation, this approach admits that the relationship between inflation and labor markets has broken down in recent decades. So instead of obsessing over inflation and individual labor market numbers, the Fed now hopes to create conditions where jobs are plentiful for all who want them.

Recent experience suggests this is the correct approach. In the pre-COVID economic peak, 80.5% of Americans in their prime working years (25 to 54) had jobs, the highest since 2001 but well short of the record 81.9% from April of 2000. Despite that very broad labor market success, core inflation only rose 1.6% in 2019, illustrating that running labor markets hot was not causing inflation to soar.

This experience – a strong labor market with little inflation – should influence the Fed’s thinking going forward, especially when it comes to the emergency measures put in place to deal with the COVID crisis.

As the economy continues  to recover from COVID, markets have begun to assume that the Fed is going to start to roll back some of these crisis measures over the next year or so. Some investors and Fed watchers believe quantitative easing (purchases of Treasury debt and mortgage-backed securities guaranteed by the federal government) may be “tapered” this year or early in 2022. Interest rate hikes are also, in the view of these market participants, likely to follow. Markets point to investors assuming rates will not be raised this year but some pricing of potential hikes is creeping into the 2022 calendar year and multiple interest rate hikes are fully priced in 2023.

This speculation – both about QE easing and the potential for rate hikes in the next couple of years – is inconsistent with the guidance the Federal Reserve has offered. 

In yesterday’s Q&A, Powell said it was “highly unlikely” that maximum employment would be achieved this year, even though there is “good reason to expect job creation to pick up.” To illustrate why strong jobs growth doesn’t mean the Fed needs to tighten, the chart below shows the prime-age employment/population ratio. As it stands, in order to achieve the same level of employment as pre-pandemic, prime age workers economy would need another 5.04 million jobs.

pasted image 0 (9)

Maximum employment likely means a prime-age employment-population ratio well above the prior cycle highs, so the shortfall is even more than that 5.04 million jobs. For context, the solid February jobs report would need to be repeated every month for 14 months to get this ratio at or above its old peak, assuming every new job went just to this category. At the 154,000 pace of job creation for 25-54 year olds only, maximum employment is 33 months away.

This is just one example of how long the hole US labor markets are in will take to climb out of, but interest rate markets are pricing almost four 25 basis point hikes by the Federal Reserve by the end of 2023…which is 33 months away.

Only one thing can be true: either the interest rate markets are wrong, or the Fed is wrong in its commitment to returning the US to maximum employment. If you take the FOMC at its word, job creation numbers this year are almost irrelevant, even if they follow the solid pace set by February’s numbers. What’s really important is the distance to maximum employment, and that remains huge, leaving interest rate speculators only one out if they’re to be proven correct about the path of Federal Reserve policy.

Read the original article on Business Insider

Democratic presidents keep having to save the US economy after Republican presidents run it into the ground

GettyImages 1230697085
President Joe Biden greets former President Barack Obama for the inauguration of Biden on the West Front of the U.S. Capitol on January 20, 2021 in Washington, DC.

  • Since the 1990s, GOP presidents keep running the US economy into recessions.
  • And then Democratic presidents come in and save the economy.
  • Democrats should remind voters of this every chance they get.
  • Michael Gordon is a longtime Democratic strategist, a former spokesman for the Justice Department, and the principal for the strategic-communications firm Group Gordon.
  •  
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit Business Insider’s homepage for more stories.

Repeat after me: The last three Republican presidencies ended in economic turmoil. And their Democratic successors had to clean up the mess. Voters need to be reminded – again and again – that putting Republicans in the White House puts our country in recession.

Republican recessions

It seems quaint compared to 2008 or our current crisis, but President George H. W. Bush ended his one term in office in recession. After what was then the longest period of peacetime economic expansion in US history, in July 1990 the country entered a recession that saw unemployment rise to a peak of 7.8% in June 1992.

His challenger Bill Clinton made the economic pain that families were feeling the mantra of his campaign and handily beat Bush, who came across as out of touch with working Americans.

One of Clinton’s first legislative achievements was an economic recovery bill that, among other things, put a greater tax burden on the wealthy and increased tax credits and wage subsidies for the working poor. As a result, during his eight years in office, Clinton oversaw economic growth that averaged 3.5% annual GDP growth but topped 4% throughout his second term. Unemployment fell from 7.4% to 3.9%, and the labor market added an average of 2.9 million jobs per year.

Cut to President George W. Bush and his policies that cut taxes for the rich, grew our national debt and trade deficit to record levels, left the US dollar severely weakened, decreased regulation of Wall Street, and ultimately helped bring about the Great Recession. 

The Great Recession was man-made, caused by reckless lending by financial institutions – not the result of the natural cycles of our economy. The devastation was – and continues to be – enormous, with America more unequal, less productive, and poorer because of the severity of the crisis.

President Barack Obama came to office needing to help bail out entire industries that our country runs on. The depth of the decline was the worst in 80 years, and the recovery Obama initiated was slow – but effective. 

After taking over in early 2017, former-President Donald Trump maintained the Obama recovery in some ways – but in other ways economic disparity grew deeper. Then, he treated the pandemic more like a political issue than a health issue, and the economy went into freefall on every metric. Millions of jobs were lost – some for good. Unemployment still sits at 6.7% despite some improvement in recent months, with communities of color hit hardest.

Now, as part of the promise of President Joe Biden, we will get through the pandemic and renew our economic strength in turn: another Democrat fixing a Republican mess.

Carter boomerang

Older voters will recall that President Jimmy Carter became the favorite Republican punching bag after his four years in office ended in economic calamity. So many negatives for the economy became associated with Carter – malaise, stagflation, the misery index – that Republicans held onto the White House for 12 years straight, the longest continuous streak in nearly 70 years. The fear of going back to the Carter years kept voters on edge and Republicans in power. 

But it’s been almost 50 years since Carter took office, and despite their superior record Democrats have failed to capitalize sufficiently on the economic strength they repeatedly ushered in and make it synonymous with their brand.

Much like the GOP did with Carter, Democrats need to make the Bushes and particularly Trump their punching bag for the next generation. The Democrats need to make it clear that they are the stewards of steady, strong economic growth and are always cleaning up after the GOP.

In most election years, voters think first about the economy and their own pocketbooks. That is the primary driver of most elections at most levels. Every Democrat needs to make the contrast in economic success their mantra – for the sake of the party and the country.

Repeat after me: The last three Republican presidencies ended in economic turmoil.

Read the original article on Business Insider

From the COVID-19 panic to the Dutch Tulip mania in 1637, here are 10 of the worst stock market crashes in history

market crash
CHICAGO – SEPTEMBER 29: Jeff Linforth stands at the Chicago Board of Trade signal offers in the Standard & Poors stock index futures pit near the open of trading September 29, 2008 in Chicago, Illinois. Stocks fell at the open as traders waited for Congress to vote on the $700 billion plan to rescue troubled financial companies. (Photo by Scott Olson/Getty Images)

  • For as long as there have been financial markets, there have been market crashes.
  • The March 2020 market crash – driven by the rapid spread of coronavirus around the world – is just the latest in a long line of panics over hundreds of centuries.
  • From the infamous Tulip Panic of the 17th century, to the 2008 financial crisis, Markets Insider decided to round up a handful of the most notable and interesting crashes in market history.
  • Visit Business Insider’s homepage for more stories.

For as long as there have been financial markets, there have been market crashes.

The March 2020 market crash – driven by the rapid spread of coronavirus around the world – is just the latest in a long line of panics throughout the hundreds of centuries that have roiled markets, crashed economies, and led to financial ruin for countless people.

Generally driven by investor panic and loss of confidence in the markets, often after a period of excitement and speculation, market panics are features of the financial and economic system around the world.

From the infamous Tulip Panic of the 17th century, to the 2008 financial crisis, Markets Insider decided to round up a handful of the most notable and interesting crashes in market history. Check them out below.

Covid-19 Market Crash, 2020

GettyImages 1211234256

The novel coronavirus outbreak not only led to a global health crisis, but also the most recent global financial recession beginning on February 20.

Although the biggest impact of the crash was initially felt in China, it quickly spread to the rest of the world as the virus spread, forcing lockdowns and plunging economic activity around the globe.

The US officially entered recession, and virtually every other economy around the world is set to follow.

Markets were initially stunned, and on March 16, the S&P 500 reported its steepest drop since 1987 as many businesses were forced to shut down and travel restrictions were set in place. The market’s reaction was sharp but short-lived, and by June, stocks were back to their pre-crash levels.

Oil Price Crash, 2020

GettyImages 1211427607

US oil prices went into negative territory for the first time in history on April 20, 2020 as the commodity faced a staggering drop in demand during the coronavirus pandemic as travel virtually ceased.

As the May futures contract for oil expired, many traders were faced with taking delivery of physical oil, so were forced into panic selling, which in turn pushed the commodity below zero.

In March, oil producers cartel OPEC held discussions to reinforce production cuts amongst allies from 2.1 million barrels per day to 3.6 million bpd and to continue this until the end of 2021.

Russia disagreed and a price war was launched by OPEC’s top trading member Saudi Arabia to fight for a greater market share. 

Oil lost almost a third of its value with Brent crude crashing 24% to $33.36 and US oil dropping 34% to $27.34.

China’s Stock Market Crash, 2015

GettyImages 1098090132

Over three weeks in June 2015, fear of a market seizure and growing financial risks across the country caused chaotic panic selling which erased over $3 trillion in the value of Mainland shares.

Possible triggers of the market crash include a surprise devaluation in the Chinese yuan and a weakened outlook for China’s growth, which then put pressure on emerging economies that relied on China for growth.

The crash’s worst day was on June 12, when the Shanghai stock index lost about a third of its value, while losses were even more pronounced in the smaller Shenzhen Composite. 

Source: CNN

Global Financial Crisis, 2008

GettyImages 175728967

Known to be the worst crash since the Great Depression, the 2008 financial crisis grew out of deregulation in the financial industry that eventually led to the inflation of an enormous housing bubble.

Like all bubbles, it eventually popped, as housing supply overtook demand and house prices fell, making it difficult for homeowners to meet their mortgage obligations, leading to a wave of defaults 

The crisis worsened when investment bank Lehman Brothers — which was highly exposed to the sub-prime market — collapsed. Numerous other lenders were bailed out by governments around the world, and markets crashed, before the global economy spiralled into recession.

Source: The Economist

The Dot-com Bubble, 1990’s

GettyImages 828179860

This bubble was fueled by investments into tech-based companies during a bullish market in the late 1990s.

By the end of 2001, dozens of companies had gone bust, and the share prices of tech giants like Cisco and Intel plunged.

Over $7 trillion in market value was destroyed, and equities entered a bear market.

It took the tech-heavy Nasdaq fifteen years up to April 23, 2015 to regain its dot-com peak. 

Source: Grin

The Asian Financial Crisis, 1997

GettyImages 1206958554

With its origins in Thailand, a severe financial crisis struck many Asian countries in late 1997.

Foreign investors were worried that Thailand’s debt was rising too rapidly when Bangkok unpegged its currency from the US dollar, and general confidence evaporated.

Indonesia, South Korea, Hong Kong, Laos, Malaysia, and the Philippines were the most affected countries as currency declines spread rapidly across, and they saw a drop in capital inflows of over $100 billion.

The Asian crisis eventually destabilized the global economy at the end of the 1990s.

Source: Britannica

Black Monday, 1987

traders nyse phone
Traders at work on the floor of the New York Stock Exchage shortly after the opening bell, September 24.

33 years ago, global financial markets witnessed one of their worst days in what came to be known as Black Monday.

The crash began in Asia, gained ground in London, and wound up with the Dow Jones Industrial Average weaker by 22.6% the same day in New York.

It is believed the crash was triggered by a combination of computer-based trading models gone wrong, a fall in oil prices, and rising US-Iran tensions. 

But unlike the 1929 market crash, Black Monday did not lead to an economic recession.

Source: Quartz

Wall Street Crash, 1929

GettyImages 2667015

The “Roaring 20s” were an age of excess and wild speculation. That all came to an end in September and October 1929, culminating in Black Tuesday, 29 October, when 16 million shares were sold on the NYSE in one day and the market collapsed

On 21st October, panic selling kicked off and by the tragic 29th, prices fully collapsed.

Finance legends like the Rockefeller family and William Durant ventured to correct the market by purchasing large quantities of stocks, but the rapid price drops did not stop. 

By 1930, America was in the Great Depression — possibly the most painful crash in recorded history.

It spread well beyond the US, and by 1932, the world’s GDP had contracted around 15%.

Source: History Extra

Vienna Stock Exchange Crash, 1873

GettyImages 117842372

On the historic Black Friday, 9 May 1873, unlimited speculation in banks and companies that existed only on paper set off a massive fall in value of shares on the Vienna stock exchange and caused a wave of panic selling.

This marked the beginning of a lesser-known Great Depression that lasted five years and spread across Europe and to the US. 

The crash brought economic growth in the Habsburg Monarch to an end, and harshly impacted a group of bankers, some counselors of the imperial court and friends of the Emperor, including the imperial family itself. 

Source: Habsburger

Dutch Tulip Mania, 1637

shutterstock_1275933358

The Tulip mania was one of the first recorded financial bubbles, and occurred primarily in the Netherlands between 1634 and 1637.

After tulip bulbs contracted a non-fatal tulip-specific mosaic virus, their prices rose steadily and made the already overpriced flower even more popular and exotic. Tulip bulbs then saw a 20-fold increase in value in just one month.

But as it happens in speculative bubbles, holders eventually began to sell off their tulips to solidify their profits resulting in a doom loop of continuously lower prices. Although it was not a widespread craze, it hurt a handful of buyers in the short-lived luxury market.

More than anything, the tulip bubble crash serves as a lesson for the perils that excessive greed and speculation can lead to.

Source: Barrons

Read the original article on Business Insider