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BY:-
SUSHMA
PGDM-IB
ROLL NO: 45
Recession
Investors spend less as they fear stocks values will fall and thus
stock markets fall on negative sentiment.
Internal factors
The economy and the stock market are closely related. The
stock markets reflect the buoyancy of the economy. In the US, a
recession is yet to be declared by the Bureau of Economic
Analysis, but investors are a worried lot. The Indian stock
markets also crashed due to a slowdown in the US economy.
Some experts view that this crisis has the potential to be far
deeper than the collapse of the dotcom boom at the start of the
decade. The decline in home prices is causing a broader set of
problems than what was witnessed during the technology bubble.
The indications of slowdown were there during the start of 2008.
Infact, the US Commerce Department confirmed that the US
economy grew by 0.6pc in the last three months of 2007.Fresh
economic data also revealed that the number of jobless claims in
the US rose by 19,000 recently to a seasonally adjusted 373,000,
showing a weakening labour market. It is estimated that as many
as two million Americans could lose their homes as a result of
the sub-prime crisis this year
External Factors
Much has happened between then and now. The Indian economy
has shown a robust and consistent growth trajectory and the
projection for 2008 is 9%. Indian exports to the United States
account for just over 3% of GDP. India has a healthy trade
surplus with the United States.
The present job recession has also hit the aspiration level of the
Indian youth. The myth of IT and the glamour if private jobs are
all history now. Now in an age of pink slips and mounting
recession, the Indian Youth is once again looking in public
sectors for jobs.
Past recessions
The US economy has suffered 10 recessions since the end of
World War II. The Great Depression in the United was an
economic slowdown, from 1930 to 1939. It was a decade of high
unemployment, low profits, low prices of goods, and high poverty.
The trade market was brought to a standstill, which
consequently affected the world markets in the 1930s. Industries
that suffered the most included agriculture, mining, and logging.
Conclusion
Recession is a natural phenomenon of an economic cycle.It has
occurred many times throughout the history.it brings fear and
uncertainty for an economy.It has both positive and negative
effects. Some of the positive effects include taking the excesses
out of the economy, balancing economic growth, creating buying
opportunities in different asset classes and creating changes in
consumer attitudes The negative effects include rising
unemployment, a severe slowing in the economy, the creation of
fear and the destruction of asset values