The Global market crash of February to April 2020, also known as the COVID-19 Crash has influenced the lives of countless people and sparked widespread anxiety. However, it is important to remember that such volatility occurs regularly and that a well-diversified portfolio built around the long-term benefits of investing can help navigate these periods.

In general, events that disrupt supply chains, slow growth or raise inflation tend to set off the biggest dips. The COVID-19 pandemic was no exception, and it took almost a year to recover from the shutdowns, supply-chain disruptions, and policy responses that accompanied it.

Other major economic crashes have occurred due to a variety of factors, such as a credit bubble in the United States that deflated in 2007, or Iceland’s financial crisis caused by the failure of banks in the country. These events led to a global recession and a sharp reduction in the value of currencies, commodities, and stocks.

Another common reason for a global market crash is political uncertainty. Surprise elections and referendum results often reshape perceptions of a country’s relative growth and competitiveness, which in turn reshape asset prices. In addition, a global wave of uncertainty can increase fear and uncertainty about the future, which may also affect stock market performance. In fact, research published in Frontiers in Psychology (Qin et al., 2019) found that exposure to stock market information increases anxiety by 437% even when markets are rising. This is surprising, as it contradicts the commonly held belief that only falling markets cause anxiety.