Question

Globalization is supposed to provide diversification benefits that domestic sectors in US can not. Find three examples where foreign events led to major set-backs in US stock markets and Discuss why those events affected the US markets.

Answer 1

Answer:

Three examples of situations in which events abroad, due to globalization, affected the stock markets in the United States were:

-The confrontation between Saudi Arabia and Russia over the price of oil, started on March 8, 2020, caused the price of said good to drop by 35% and the shares of major companies in that market such as Exxon Mobil, Chevron or Shell fell in the same proportion.

-The emergence of the coronavirus as a global pandemic in China and Europe generated the speculation of many investors, who began to invest in pharmaceuticals such as Pfizer, Glaxo or Abbott, increasing the value of their shares.

-Brexit, by which the United Kingdom has separated from the European Union, the second largest economy in the world and whose main external partner is the United States, has caused a drop in European markets that has indirectly affected the American stock markets, by involve abrupt movement of the shares of major European companies such as Shell or Volkswagen in American stock exchanges.