Obviously if it keeps going down, that’s bad. But it looks like it’s at a support level and still much, much higher than it was 5 years ago. (Using SP500 as a proxy for the market at large)
In: Economics
Markets are a forward looking economic indicator. They are very good at consuming information and making predictions about the future. If the market takes a significant downturn in a relatively short period it can be an indication that financiers are predicting an economic downturn in the future. I say may, because markets also dance to their own fiddle. Like you alluded to, nobody makes a profit until they sell. If financiers are sitting on significant paper profit like many are now, they will want to turn that paper money into real money. Which is ironically printed on paper. If that is what is happening then you would expect markets to start to bounce back relatively soon. The problem is that right now nobody can be really sure which situation we are in. A huge down day like today can be an indication that we are at the bottom, with all speculators having sold off only leaving long term investors. If that’s the case the market can only go back up. Or it’s the start of gloomy economic days. It will be easy to see in hindsight which is was.
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