As President Donald Trump has discussed implementing tariffs, the stock market has wavered. In April of this year, the stock market took a dip after President Trump put his tariff policy into effect. This resulted in the Dow Jones index losing over 4,000 points, the S&P losing 10% and the Nasdaq losing 11% over the course of two days, according to the Wall Street Journal. The market lost $6.6 trillion, which was the largest two-day loss on record.
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As the tariff discussions continue, investors are worried that the worst is yet to come. What would happen if the stock market were to drop 50% in just one day? Experts weigh in.
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Banks Would Temporarily Collapse
If the markets dropped as much as 50% in a day, people would start to stockpile as much cash as possible. This would mean they’d take their cash out of the banks, leaving the banks in bad shape. “People panic, pull money out of stocks and banks, and start hoarding cash,” said David Capablanca, host of The Friendly Bear Podcast.
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Employment for Lower Classes Could Be in Jeopardy
Aaron Razon, personal finance expert at Couponsnake, explained that, even if a member of the lower class doesn’t have any money in the stock market, they would be the most affected class. This is because, most likely, their employment is somehow tied to the market, and if the market suffers, their income would, too.
“[The lower classes] often rely on the margins of the economy, and a 50% stock market crash could be a direct attack on their livelihood and affordability, especially as it threatens their earnings, which are sourced from their daily income. With reduced hours and their limited or non-existent financial cushion, their chances of competing with housing, food and healthcare costs would be severely diminished,” he said.
That Being Said, a 50% Crash Is Pretty Unlikely
Though the consequences would be dire, Capablanca said a 50% drop is probably not in the cards for 2025. “Could the market drop gradually over a few days or a month? Maybe, but when you look back through history, like during the Great Depression era, that kind of prolonged, severe bear market is very unlikely to happen again. We now have more technology, more liquidity, more sophisticated algorithms, and greater access to the markets than ever before. That means more volume and more demand, which helps keep things more stable overall.”
Capablanca added that if there is a significant crash, one of the best things investors can do is buy stock if they have the means. It’s counterintuitive, but he said it will pay off in the long run. “Big, fast crashes like that are often great buying opportunities. They’re usually driven by fear, and fear is just an emotion. The companies themselves haven’t changed.”
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This article originally appeared on GOBankingRates.com: What If the Stock Market Dropped 50% in One Day?
