This Monday, the Dow Jones Industrial Average closed down 1,031.54 points, or 3.55%, which has been the biggest point drop in nearly two years. The S&P 500 also had its worst trading day since February 2018, falling 3.35% to 3,225.89 and erasing its year-to-date gains, while the Nasdaq Composite closed 3.7% lower at 9,221.28. Combined, this totals to a stock market value drop of a massive $1.7 trillion dollars in the past two days.
Despite this, President Trump tweeted his satisfaction with the results:
Trump's administration has been floating a plan to inflate the market by proposing a plan to allow people who earn over $200,000 annually to $10,000 on a tax-free basis in stocks. This would keep the prices of stocks up and make the market appear bigger, but stocks are already very high and people who are convinced to buy now may find their stocks devalued if the market continues to drop. Some members of the Federal Reserve are starting to publicly express worries that the stock market is in a bubble, because the Fed’s monetary policy has kept interest rates low for a very long period of time. In addition, this doesn't actually boost the economy at large because having a rising stock market doesn't mean more jobs will be created and more people will be hired.
The market has taken a massive hit due to concerns about the Coronavirus spread affecting trade worldwide. Iran, India, Italy South Korea, and other nations are starting to report unexpectedly large outbreaks, which threaten to disrupt their economies the way that it has in China.
As several nations, including Japan and Germany teeter on the brink of recession, a drop in demand for goods and the closing of several Chinese factories threaten to make the problem worse.
The World Health Organization is preparing for a potential pandemic, said WHO Executive Director Mike Ryan.
Investors had previously hoped that the economic damage would remain mostly in China, similar to the 2002-2003 SARS outbreak, but the world's supply chains now rely on China for labor and manufacturing.
“There’s just growing angst in the investor community that this thing is more serious than we realized,” said Chris Meekins, an analyst with Raymond James and former Trump administration preparedness official. “When you’re worried about catching a disease, you’re not going to go out to dinner; you’re not going to go to the movies or sporting events or concerts. The only question is how widespread this becomes.”
Another factor affecting the potential response to the Coronavirus is that Trump spent the last few years gutting the agencies best suited to deal with the crisis. Last month, Foreign Policy reported that the administration has “intentionally rendered itself incapable” of problems of this magnitude, having wiped out its “entire pandemic response chain of command, including the White House management infrastructure” and shutting down both the National Security Council’s global health security team and its counterpart at the Department of Homeland Security.
This has become a major setback in the President's re-election campaign. Much of his strategy centers around the robust economic growth of the past few years, but a crash like this could give his opponents an easy target of attack. The so-called "Trump Bump" has been a boon for the wealthiest people in the country but it leaves the other 95% behind. Many Wall Street analysts have predicted a re-election based on the markets, but this could be a huge setback.