It is true that the recent weeks have seen extremely fearful and abrupt stock movements on Wall Street. August, this year has been a cruel month with respect to the developments in the stock market. In fact, several investors lost a good chunk of their savings due to the convulsions in the stock market that have been quite disturbing lately. But the question remains why did it happen?
Several financial analysts and pundits claimed that the convulsions were due to the devaluation experienced in the Chinese economy and due to China’s probable serious weakness. China’s financial devastations are suppose to devastate the export market of the United States of America and thus lead to sinking of the nation’s prosperity ship. However, there are many who do not agree to this particular reasoning.
The reason for disagreement
The output of the United State’s economy is about $18.4 trillion every year whereas the value of total exports that are made to China by U.S. is only a meager $120 billion annually. The figure indicates that it is just about 7/10th of 1% of the economy of the United States of America. Even though the exports from the United States of America to China dropped by about 20%, which is a big percentage by all account, it should still have only a slight impact on the economy of U.S.
But there were moments when the stock markets in the United States of America were off by a massive $2 trillion. If the share markets show a movement of 1,000 points in just a few minutes, it is simply not because some investors are selling about 1,000 shares of General Electricals from their home systems. The movement is due to factors like pension funds, endowment funds, huge hedge funds or trading funds operating at high frequencies worth billions of dollars are being sold at the mere push of a button.
The ulterior agenda
The movers and shakers do it in all likelihood as they and their clients can make large sums of money from these strategies. Stocks often show abrupt movements in the stock markets as the big people in London or New York or perhaps in Hong Kong tell their traders to move a particular guy down the ladder. They may also instruct their traders to start rumors about China’s sudden weakening economy so that the stocks can sell like hot cakes.
And then the share market starts crashing until there is some other boss in the investment market who instructs his traders to move the prices of certain stocks up, purchase them and makes an announcement of sudden new and strong orders from Shanghai as the reason for the prices going up.