HN Explorer

Ask HN: Why are the stock markets tanking?

2 points by TekMol ↗ HN
It looks like the outbreak of war has made the stock markets go down quite a bit.

What is the theory behind this?

Is it just because the productivity of Russia and the Ukraine will go down? Or is there some other rationale here?

20 comments

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theandrewbailey
Stock markets hate geopolitical instability of any kind.

Productivity of the entire world was almost destroyed with COVID lockdowns (and still has not recovered), but stock markets have been hitting record highs since.

llampx
> Stock markets hate geopolitical instability of any kind.

Explains why the stock market went on a bull tear at the start of WW2

crate_barre
There were probably outflows already in progress, this is just accelerating the outflow.
llampx
If the markets followed the news, they would crash and stay down. Why in the middle of the COVID uncertainty did they start rising again in March 2020? Nobody knows. And nobody knows the "why" of the markets, just the "what" - and the news is just made up afterwards to fit the market's movements.

If in one week or one month Ukraine is still invaded and the markets are up, what does that mean?

theandrewbailey
> If in one week or one month Ukraine is still invaded and the markets are up, what does that mean?

It means that things have stabilized. Markets hate uncertainty. If the Russians stay in Ukraine, that's bad news for sure, but it means things have stopped changing.

llampx
How about today? What changed between the morning and the afternoon that the market went up from ~4100 to ~4300?
eaenki
It’s not like every person institution and algorithm sells at the same time lol. Also, cascading effects.

Markets hate instability, and any price takes time to consolidate. It might never “consolidate”during high volatility.

dont see this as up as down but rather as volatility because yep it’s a volatile time

seanmcdirmid
Knee jerk reactions are common in the stock market. "Maybe it won't be as bad as we thought it would be 24 hours ago"
sharemywin
Don't forget the fed is raising interest rates because of inflation.

And the fed hasn't been really good at navigating that process.

so if cheap money is gone what's going to prop up the stock market.

gostsamo
You have actual risks for food, fuel and the based on them products. Also, during the covid crisis, the central bank were trowing money like an russian oligarch in a nightclub while FED and likely ECB will raise the base interests to contain the inflation.
zzleeper
I'm VERY curious about what will the Fed do. On the one hand, rate hike seems less likely, but on the other this will drive inflation up.
gostsamo
I'd like to know as well. However, I'd bet on raising the interests because the war will be bloody, ugly, and short.
seanmcdirmid
This is just more can kicking. It will be bad when they finally pull back, but they are also waiting for the best context to pull back. Inflation will continue to shoot up, the pressure for the Fed to finally act will build.
rtcoms
War brings uncertainity. Stock markets don't like uncertainity.
zzleeper
If the US does what they should, they should completely blockade Russia from any access to the West, including SWIFT blockade, trade embargo, complete visa revocation, etc. This is not that useful (sp not compared to doing it 10 years ago) but still helps to reduce Putin's ability to keep waging war as it cripples Russia's economy.

BUT that of course has a cost to the West. Less business, risk of recession, risk of stagflation, etc. and that definitely tanks the economy. Until yday Bloomberg estimated the SP500 was trading at a 10% discount due to war concerns (my take is only ~5%) and overnight it has fallen only 2%, so I don't think a 2% fall over the largest war Europe has seen since WW2 is particularly large.

TekMol
> risk of recession

Why would those sanctions on Russia bear the risk of a worldwide recession? Russias economy is smaller than that of Italy, isn't it?

frontman1988
Severe sanctions will only end up hurting the average russian citizen. In a dictatorship, that's a good way to create further instability. You don't want to make a Afghanistan out of Russia. Especially not with the number of nukes they have.