Following the plummet of US stocks by almost 1,500 percentage points, which amounts to a -5.8%, the Icelandic stock market also dropped by more than 1% after the Icelandic Stock Exchange Kauphöllin opened this morning.
According to the New York Times, the plunge in the US stock market had always been a matter of when, rather than if. The Dow Jones had been steadily increasing during the past few months, experiencing a 25% rise during the year 2017. The recent tax cuts, as well as an accelerated economic growth and increasing wages, are among the reasons believed to be behind the current stock market situation.
The Stock Index hadn’t fallen this low in a single day since September 2008—a thought that was not least of all worrying considering that US falling stocks have a domino effect on the global markets. The situation in Iceland is currently comparable to that in Europe, but while it is still hard to draft a full assessment of future consequences, the local economy is thought to be fairly steady.
“In a long-term context, this fall isn’t a major issue,” Stefán Broddi Gudjónsson, Director of Arion Bank’s Research Division, told RÚV. “Some call this decline now just a correction. Most economic forecasts now assume that economic growth in Iceland is moving closer to the norm, closer to what is happening in neighboring countries.”
Stefán was also adamant on noting that while the global stock market influences the Icelandic one, corporate and household debt is in Icelandic krónur and not in foreign currency, as well as being comparatively low.