Lately the stock market is gradually growing and it is this trend which sets the main tone for the behavior of investors. It should be said that many investors who began to invest in the market relatively recently, simply do not have the skills to act in a falling market, as well as do not understand the trends that may be present here.
Nevertheless, the recent events related to Facebook, Instagram and WhatsApp outages have shown how intensely the market can react to such situations and how stocks, including big companies, can collapse.
Indeed, many investors lost on the stocks of the most famous brands and the market began to seem less reliable. Just this fact alone is enough to make conclusions for the next period. After all, it is quite obvious that such giants as Facebook or Instagram always seem to be the most reliable companies, which represent stability. This is why investors prefer to invest in the same Facebook in order to have reliable assets available. However, there are conclusions to be drawn here, and not only from the situation with the Facebook crashes, but also in connection with previous crisis periods, which we offer to briefly consider.
The dot-com crisis.
As a basic reference point we will look at FAANG:
Facebook (FB);
Apple (AAPL);
Amazon (AMZN);
Netflix (NFLX);
Alphabet (GOOGL) (Google only became part of the Alphabet holding company in 2015).
Shares of these companies are considered the most relevant to almost every investment set and many prefer to have them in their own portfolios. Along with this, research on such large companies is quite handy for understanding how the market might behave. Of course, if we are engaged in forecasting here, we should take into account that such giants show more stability and allow only to draw conclusions about trends, while less developed companies in crisis, as a rule, show less stability and steadiness.
So, the first crisis that should be considered is the so-called dot-com crisis, which was observed at the beginning of the new century. At the same time, the trends in the market were very characteristic. Prior to that, the Nasdaq index rose by more than a hundred percent, but in March 2000, the index begins to decline by 34%. It should be noted here that not all of these companies were on the market then. For example, Facebook went public only many years later, and other companies had not yet developed sufficiently. Nevertheless, we should note the general trend here, which indicates that it will take many years for large companies to recover.
For example, Amazon, which lost almost 100% of its value, took eight years to recover. Although, by then, the company was actively engaged in online sales of books as well as video and audio content.
The Mortgage Crisis
The next period, which began around 2008, can be conventionally called the mortgage crisis. Although in reality, of course, there are a much more significant number of factors that eventually influenced the fall of the market. Nevertheless, the very fact that should be noted is that companies which had recovered by this period began to lose market value again. Apple, for example, released its first iPhone before the crisis period, which allowed it to show resilience. The company sagged by about 50 percent. At the same time, it should be noted that in 2008 and 2009, the Nasdaq index showed a negative trend of 45% or more. Thus, the companies in question also lost about 50% of their value and at the time, for most traders, buying shares of these companies looked like an online casino game.
Nevertheless, the global recession has affected this group of companies to a much lesser extent, unlike the previous crisis. It took a much shorter period to recover, and many corporations by that time had a solid reserve of finances and were gaining additional traction in the market, which allowed for an intense recovery and even showing stock gains.
Particularly noteworthy here are Amazon and Apple, which continued to build momentum even during the recession. In the future, Netflix will join them, largely due to the use of streaming video.
Of course, of the recent crises we should mention the pandemic, when many companies have shown quite high resilience. It is clear that Netflix products, as well as Apple and Amazon, are in high demand precisely during the quarantine period. It is interesting to observe that Facebook, in turn, has lost in the pandemic era. It is quite possible, as experts say, this is the market's distrust of the company's shares; it may also be the matter of elementary inaccuracies in the market assessments, which determine the stock's drawdown.
Anyway, if to look at present tendencies as a whole, now we observe the situation of crisis conditions, when at first Nasdaq index actively grows, and after this there are preconditions for very intensive fall. And the recent force majeure with popular social networks can be considered as a peculiar bell, which allows to assume occurrence of new trends at the market of investments.
