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What Could Lead To The US Stock Market Crashing?

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Created on
February 23, 2023


What’s Inside

If you're an existing investor, you must be contemplating investing in US stocks after the latest fiasco. It's normal to think, 'why is the US stock market falling?' or 'Is my money invested in US stocks safe?'. Besides recent poor performances causing anxiety, Wall Street posting the worst day of 2023 must have been particularly tough. Well, market volatility is nothing new. What goes up must come down, and vice versa.

What Makes the US Stock Market Tick?

  • Economic indicators (e.g. GDP, employment, inflation)
  • Company earnings and financial performance
  • Interest rates
  • International events (e.g. Covid pandemic)
  • Global market trends
  • Political events and policies
  • Natural disasters and geopolitical tensions
  • Technological advancements and innovations
  • Market sentiment and investor psychology

If you were to narrow down the top cause for the US stock market crash of 2023, it would be – the policy changes and repo rate hikes brought about by the US Federal Reserve and the ongoing conflict in Ukraine.

The Role of the US Federal Reserve

The Federal Reserve, like the RBI, is a central bank and, as such, is the custodian of the country’s monetary policy. Reeling from the post-pandemic effects, the US witnessed a rapid rise in inflation which reached a high of 9.1% in June 2022. It was the highest level in almost 40 years. 

Naturally, the Federal Reserve promptly got into action mode — altering its policies and sharply increasing interest rates to discourage borrowing, encourage savings, and reduce the currency supply to curtail inflation. 

Domino Effect

All actions are followed by reactions. This theorem also applies in the stock market — a record-high rise in prices of commodities and goods and an increase in interest rates led to negative investor sentiment. An increase in the yield of low-risk government bonds also appealed to investors and reduced the demand for high-growth stocks in the market, leading to a market drop.

Note: The ongoing conflict in Ukraine has caused a big dent in the supply chain of valuable commodities like fuel, gas, etc., significantly raising prices. This geopolitical instability has also played its part in the fall of the US markets.


It's only human that a sense of panic sets in whenever there is increased uncertainty due to a market drop. Many investors decide to sell their stocks, causing prices to fall further. It leads to a market downturn. So, what can investors do? Consider this an opportunity to buy top-notch FAANG stocks at lower-than-usual prices.

Investment gurus like Warren Buffett have always preached the merits of long-term trading and avoiding panic selling. It is not the first market slowdown and won't be the last. Staying invested is considered wise after thoroughly evaluating your positions and risk exposure. 

If you are also more of the 'glass half full' person, consider getting an account on Fi to invest in US stocks. Fi enables you to invest in top US companies — at industry-best forex rates and zero brokerage fees. You can own shares in Apple, Tesla, Microsoft, etc.! Novice investors can use Curated Collections to make sound investment decisions. Seasoned investors can dive deeper, apply many filters (like Stock Price) and pick stocks from a wide range of international options. 

Here's a short video on India's GDP growth: https://www.youtube.com/shorts/hsaBpaDokoo

Frequently Asked Questions

1. How long do stock market crashes last?

There is no fixed rule to predict how a stock market crash lasts. However, if you look at past trends in the US, S&P 500 Index has undergone 25-26 slow-down periods in the last century. Yet, it has bounced back successfully each time. This historical evidence supports the confidence of investors who are treating the current downturn as an opportunity to buy stocks at a low price for future gains.

2. Can the Stock Market Crash Again?

Market volatility will always exist, and successful investors understand the risks well. Stock markets get influenced by factors: Internal (economic growth indicators, the country's GDP, fiscal policies, and foreign investment in-flow) & Global (geopolitical events, conflicts, pandemics, sanctions, etc.). However, it's worth noting that the stock market has historically tended to recover from crashes over time and that past performance does not guarantee future results.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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