TSX At The Verge Of Entering A Bear Market Phase
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TSX 12% Drop
The Toronto Stock Market or the TSX as it is better known is not having a good week. While we have known the TSX to rise and rise, this is not the case. As is, the TSX has dropped by 12% and gone back to where it was in 2016, making it very close to entering a bear market.
And because of this, panic had taken over.
TSX One Day Decline
The TSX has declined in one day. Because of this, fear surrounded companies. Statistics show that the S&P/TSX composite index fell by almost 1 761 points to 12, 508. That shows a 12% drop, which is the biggest ever in history. This spectacular drop has even managed to overshadow the record that was previously set in 1987 on Black Monday.
Affected Companies by TSX Drop
There are at 229 companies on Canada benchmark and all of them have been affected by the TSX drop. One company seemed to barely survive that is Linimar, who are makers of auto parts. However, the rest of the companies from energy to finance to utilities to retailers and even online casino and gambling sites have been severely crippled by the 12% TSX drop.
Impact on Stock Prices
Canada
Once the stock process drop, brokers are quick to both buy and sell and stocks. This is exactly what happened. Everyone everywhere was trying to make sure that sell stocks. As a result, circuit breakers were put in place to the TSX a 15-minute breathing gap. However, this was to avail as it did not decrease the pressure.
USA
Not only where the Canadian company stocks affected by the TSX drop, companies in the USA felt the impact of the drop as well.
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Dow Jones
Dow Jones Industrial Average shed 2 352 points to 21 000. This was a 10% decline in just one day. And it was the worst since the 125-years that Dow Jones has existed.
In an attempt to stop the blood gushing out, the USA Federal Reserve pledged to buy $1.5 trillion of US worth assets. However, investors chose to ignore this and looked to towards the real reason for the tumble of stocks in the TSX and Dow Jones, the coronavirus.
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Wall Street
The good and bad thing about stock markets drooping and rising is the ripple effect. Because of the sudden decline in the TSX, Wall Street couldn’t be left unscathed.
Wall Street has s VIX Index or the “fear index” as it is known, is used to track volatility. As one would expect with the sudden fall of stock prices, it rose from 19 points to 73.07. This is higher than the financial crisis of 2008 and 2009.If the investors’ assumptions are correct the two stock groupings, are at the verge of entering into a bear market. With the TSX being down by more than 30% from the 18 000 points it acquired last month, a bear market phase seems like the definite outcome.
Bear Markets: What Are They?
The stock exchange market is represented by a bull and a bear. A bull market is when stocks are growing and the bear market is the opposite when the stocks are dropping.
There is no specific timeframe as to how long these bear markets can last for. However, in 1987, with a 27.1% drop, it lasted for 101 days. In 2000, it lasted for 546 days after a 33.5% decline. 2002 had its own bear market that lasted for a slow 278 days after a 33.8% drop. 2007 was the longest ever period that spanned for 408 days after dropping to 51.9%. In 2009, it lasted for a mere 62 days after a 27.6% drop.
Is There Any Hope For The Rise Of The TSX?
Finance Minister Bill Morneau remains hopeful regardless of all that is happening. Just recently he assured the nation that they were doing all they could to return the TSX to its glory days. He also mentioned that he was set to meet up with the U. S Treasurer Secretary and other Canadian banking leaders to make sure that they deal with the situation at hand.
TSX FAQs
What is a bear market?
In stock exchange there is a bull and bear market, the bull market means that there is a rise in prices. While the bear market means that the prices are dropping. Both the two are metaphors used to describe the rise and fall of stocks.
What is the highest record of the TSX?
The highest record o the TSX was in 2006. The S&P/TSX composite jumped 119.38 or 1.2% to 11 856.81. And one the week benchmark it rose by 2.16%.
What caused the TSX to drop?
Many are speculating the drop in the TSX was a result of the coronavirus and the recently implemented travel ban by the USA.
Who owns the TSX?
The Toronto Stock Exchange is a wholly-owned subsidiary of the TMX group Group for the trading of senior equities.
How many stocks are in the TSX?
There are 3 985 companies listed on the exchange. 1 561 on the Toronto Stock Exchange and 2 424 on the TSXV, Toronto Stock Exchange Venture.
