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Illustration: Aïda Amer/Axios

The stock market is heading south with unprecedented velocity amid coronavirus fears. Does that mean it's crashing? Are we in a recession? Is this a financial crisis?

  • No, no, and no.

How it works:

A stock-market crash happens when the market plunges suddenly, often for no particular reason.

  • The stock market might be down 13% from its highs, but that decline took place over more than a week.
  • Crashes can cause investors to lose a lot of money very quickly, but seldom have a big effect on the economy as a whole.

A recession is what happens when the broader economy stops growing and starts shrinking.

  • The official designation of when a recession started and ended comes many months later from the National Bureau of Economic Research, a nonpartisan nonprofit.

A financial crisis will normally cause a recession. But while a recession takes place across the economy, a financial crisis is centered on the financial system, especially banks.

  • In a financial crisis, fears of widespread defaults on bonds and loans spark worries that a country's entire banking system might be insolvent.
  • Unless the government steps in, often with a bank bailout, the economy can rapidly spiral into a full-fledged depression.

Where are we now? Stocks are down, but it's a relatively orderly (if fast) decline, without a lot of panic selling. Financial analyst Josh Brown calls it "Panic Holding."

  • Because we're more than 10% below the all-time highs, this is a "correction."
  • If we go down to 20% below the all-time highs, it will officially be a "bear market."
  • Context: The market is still about 30% higher than it was when Trump took office.

What about the Fed? The Fed's job is to prevent a recession, and it should only care about the stock market insofar as it impacts the broader economy.

  • On Friday, the Fed made the rare move of issuing a statement during trading hours saying it was "closely monitoring developments" on the coronavirus.
  • "We will use our tools and act as appropriate to support the economy."

Go deeper

Dion Rabouin, author of Markets
Oct 8, 2020 - Economy & Business

Investors still looking for clarity on Fed's inflation aims

Illustration: Aïda Amer/Axios

Market participants got little more information on how the Fed plans to boost U.S. inflation with the minutes from the central bank's latest policy meeting on Wednesday, and in particular, lacked guidance on its quantitative easing program.

Why it matters: Some have blamed the Fed's lack of specifics on the future path of QE for the market's pullback since early September.

36 mins ago - World

Special report: Trump's U.S.-China transformation

Illustration: Aïda Amer/Axios

President Trump began his term by launching the trade war with China he had promised on the campaign trail. By mid-2020, however, Trump was no longer the public face of China policy-making as he became increasingly consumed with domestic troubles, giving his top aides carte blanche to pursue a cascade of tough-on-China policies.

Why it matters: Trump alone did not reshape the China relationship. But his trade war shattered global norms, paving the way for administration officials to pursue policies that just a few years earlier would have been unthinkable.

McConnell: Trump "provoked" Capitol mob

Senate Majority Leader Mitch McConnell (R-Ky.) said on Tuesday that the pro-Trump mob that stormed the U.S. Capitol on Jan. 6 was "provoked by the president and other powerful people."

Why it matters: Trump was impeached by the House last week for "incitement of insurrection." McConnell has not said how he will vote in Trump's coming Senate impeachment trial, but sources told Axios' Mike Allen that the chances of him voting to convict are higher than 50%.