By Raphael Lulay, analyst at Germany’s Kryptoszene
Although the Spanish flu caused around 50 million deaths in 1918, the Dow Jones index decreased by only 14.3%. Since the beginning of the decline on February 17, 2020 that resulted from the coronavirus outbreak, the US index has fallen by 34.5%, according to an infographic by Kryptoszene.de. Nevertheless: the comparison with other financial crises shows that share prices can fall even lower.
During the economic crisis in the 1930s, the Dow Jones index decreased by 89%. During the 1987 and 2008 stock crashes – by 36% and 54%, respectively (see the infographic). The Spanish flu, on the other hand, had a much smaller influence on the stock prices, despite the higher number of deaths. The research by Kryptoszene.de is based on the data from “Bloomberg” and “RWI – Leibniz Institute for Economic Research“.
Meanwhile, the duration of a stock crash cannot be assessed at the moment. During the Great Depression that started in 1929, it took the Dow Jones index 34 months to return to its previous high value. In 1987, it returned to its value in two months, in 2008 – in 17 months.
The Dow Jones index is not the only one to suffer a fall. The DAX also lost around 37.24% in value since February 2020. The leading German index loses points in every single industry. Companies in the mechanical engineering and mobility sectors are affected the most. The least affected are the companies from the energy and raw material sectors. Although, even here, the losses are, on average, at 17.36%.
Coronavirus Could Attract Investors
It is still unclear how long the coronavirus will drive down the share prices. However, past data shows that major disruptions on the stock exchange can also be beneficial for the investors.
In the wake of the latest coronavirus pandemic, the German politicians fear that the German stocks or companies could still sell out. Federal Minister of Transport Scheuer said that this is not only a viral attack but a dangerous attack on the economy as well.
Frontpage December 19, 2019