Stock markets have taken a drastic hit in response to the current global pandemic. The US Securities and Exchange Commission has enforced a circuit breaker in order to prevent another market crash like the one in 1987 where the Dow decreased by 22.6%. But, in March alone, the circuit breakers have been triggered 4 times. Since 1987, they have only been triggered once in the 1990's, so having it happen 4 times in one month is not a good sign. There are certain guidelines to when a circuit breaker will happen, that being when the S&P 500 Index decreases by 7% or more. The S&P 500 is a stock market index that measures the stock markets of 500 large companies in the United States. When the circuit breaker is triggered, there is a 15 minute pause on all stock market exchanges in the US. Though if the index drops by 20% then trading stops for the entire day. With all this happening, the Chicago Board of Exchange Volatility Index (VIX) has been fluctuated a lot in the past 2 months, meaning it will take investors months to truly understand the economic impact of the coronavirus at hand. Market shocks in the past caused the VIX to fluctuate too, sometimes taking anywhere from 5-15 months for the levels to normalize again. Though because the current situation was caused by health issues, it could take a lot more time than 5-15 months for VIX to fully go back to normal. Only time will tell how destructive this virus really is on the stock market.
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