In the past two weeks, the stock market has plummeted, reaching the lowest it has been in years. Since then, stocks have rocketed up and down wildly in value repeatedly. In a few days, the market went from appearing to be stable to very volatile. But really, the stock market was never stable. It only gave that false appearance. The stock market is and has always been random and unpredictable.
Since the crash, many people have spent the past weeks wondering what caused it. While many people have guessed at the possible causes of the crash, that is all they are. The simple truth is that nobody knows what exactly causes the stock market to crash.
The stock market is a chaotic, disorganized conglomeration that is heavily affected by countless, random factors. That is before taking into account that whenever anyone attempts to predict the behavior of the market, regardless of ability or accuracy, it prompts people to impulsively buy or sell. This inherently chaotic nature of the stock market makes it impossible to truly understand what ultimately causes the market to fluctuate and impossible to predict its future.
Therefore, it is not only that nobody knows what caused the market to crash, but that nobody will ever know, because we cannot understand what the market will do or the cause.
Many have wondered whether or not the recent stock market crash could have been predicted. The crash could not have been predicted. People should be especially wary of listening to those who now claim that the crash can be easily explained. This is nothing more than hindsight bias. It does not enable anyone to predict or avoid a future market crash.
Many individuals have weighed in on the behavior of the stock market, both after the downturn, and in the calm before the crash. Perhaps at the forefront of this is President Donald Trump. Prior to the crash, Trump regularly credited the stock market’s high to his time in office and his economic policies. Past presidents have claimed the market’s success was related to their own time, but none as frequently or explicitly as Trump. This backfired for him when the market crashed.
It is for this reason that neither Trump nor any other president should to talk about the stock market. This is not only true for politicians, however. The same applies to the many economists and stockbrokers who attempt to analyze and predict the market. The countless factors that influence the market and the ever-present possibility of unpredictable events, such as natural disasters, make it ultimately impossible to forecast the stock market. The existing methods that claim to do so are the result of incorrectly applied mathematics and complex theorizing which ultimately lacks any substance. This boils down to nothing more than rough guesswork and dangerous false confidence.