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Are We Headed for Financial Crisis?
02/06/2017 Finance Helen J
keywords: Financial Crises

The inauguration of Donald Trump as the President of the United States has raised concerns about his policies and suggestions for the future. While it is clear that President Trump is taking steps to improve the country's economy, his methods and policies cause worries about a potential recession. When combined with a volatile stock market, individuals and groups are growing in their concern about the possibility of a major depression that may even exceed the Great Recession. Fortunately, it is not likely to take a dramatic turn in the near future.

Normal Market Activity

The stock market is normally a roller coaster of different activity. Stocks rise and fall for a variety of reasons throughout the year, which impacts the entire market. Problems that do not relate to specific companies, like a sickness in livestock or an increase in the cost of certain supplies, may impact the entire market over a short period of time.

Generally, the stock market rises and falls throughout the year and may take a downturn of up to 14 percent within a short period before rising again. Even though the market has dropped in recent weeks, it is after a period of significant gains. A portion of the adjustment relates to normal corrections within the stock market.

Volatility and the Stock Market

Since the normal market figures in a typical year without a recession may rise and fall as much as 14 percent on average, the volatility in the stock market is not a cause for concern. The market should have some variation throughout the year and the sudden change over the last weeks does not suggest a recession is imminent. Instead, it suggests that the market is correcting for inaccuracies due to the sudden rise over the past months. 

Future Possibilities

A key concern about the future of the economy and the market is President Trump's proposed changes to the trade agreements. It is not yet clear how new trade agreements might impact Americans, but it is possible that a poor agreement or an excessively aggressive proposal may not have the positive impact President Trump expects.

Ultimately, the future has many possibilities; however, it is not likely that we will see a recession in the upcoming months or year. Adjustments in the market are normal and the underlying economy is actually in a period of growth. As the economy continues to grow and more Americans obtain gainful employment, the stock market will reflect the positive changes. While it is not clear how President Trump's policies will impact the overall economy since he has only started working on his plans, it is unlikely that it will cause a major recession due to the present growth in the economy and the stability of American companies.

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