Stock market crashes are generally caused by some combination of speculation, influence, interest rates and inflation, taxes, political risks, and panic. Here are brief examples of some of these areas. While the market didn’t crash completely like it did in 1929, the “irrational speculation in dot-com companies” caused a crash in technology stocks in the early 2000’s.
Usually, higher interest rates mean it costs more to borrow money, which means people buy less, which can then cause stocks to fall. You will often see this when interest rates rise, mortgage rates go up so people buy fewer houses and then the homebuilding stocks fall. “Markets like stability, and wars and political risk represent the exact opposite.” Fear that something will happen can cause panic. This is what happened after the financial crisis in 2008. Investors feared the U.S. banking system would fall apart; they panicked and the market crashed.
