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Big Question: Should Trump Shut Down the Falling Stock Market?



Photo by Markus Spiske

by Jonathan T. Fluharty-Jaide for The Conversation

Editor’s note: Financial markets across the globe have plunged repeatedly in recent weeks over concerns about the growing economic toll from the coronavirus pandemic, on some days falling over 10%.

This has raised the question of whether governments should shut down their stock markets until the panic subsides. We asked Jonathan T. Fluharty-Jaide, a finance expert at West Virginia University, what measures financial exchanges have to stem panic selling and whether he believes a shutdown would be a good idea.

1. What measures prevent a free fall in prices?

For example, if the price of the Standard & Poor’s 500 index falls 7% from its previous close, trading of all stocks on the two major U.S. stock exchanges – the New York Stock Exchange and the NASDAQ – is suspended for 15 minutes. If it drops an additional 6%, trading halts for another 15 minutes. If the S&P 500 drops a further 7% – for a total drop of 20% – then trading ceases for the day.

A 7% drop has happened several times in the current crisis, most recently just three minutes into trading on March 16 following the Federal Reserve’s surprise decision to cut interest rates to near-zero.

Additionally, there’s something known as the “limit up, limit down” rule, which set limits on how much any stock, exchange-traded fund or futures contract can go up or down in a five-minute period before triggering a temporary halt in trading for that security. This rule was created in reaction to the so-called flash crash in May 2010 in which a single algorithmic trade led to a 1,000-point intraday drop in the Dow Jones Industrial Average – at the time worth approximately US$1 trillion in market value.

2. Have these measures been triggered before?

U.S. markets first began implementing circuit breakers in 1988 following the “Black Monday” crash on Oct. 19, 1987, when the S&P 500 fell 22.6%. The goal was to reduce overall market volatility.

The first and last time U.S. markets hit the circuit breaker – before this year – was during the Asian financial crisis on Oct. 27, 1997. This shows just how infrequent price changes of this magnitude are. Neither the dot-com crash of 2000 nor the 2008 financial meltdown triggered a circuit breaker.

3. Do they work?

It depends on what we mean by “work.”

Their intended purpose was to stop a deluge of traders selling assets at increasingly lower prices to get out before the market collapses entirely – and in effect contributing to that collapse.

This type of fear-driven run on the markets is dangerous: If no one is taking the buy position, it becomes a race to the bottom.

Since circuit breaks are rare and we don’t have lots of events to go on, it’s hard to say how effective they are. But so far, every time they’ve been triggered, stocks have rebounded the following day. That’s what happened in October 1997, and when the breakers were triggered on March 9 and March 12 of this year.

This suggests they were effective at ending panic selling – at least temporarily. They are not intended to prevent markets from continuing to go down. And research shows circuit breakers may actually increase market volatility in the days and weeks that follow. This means that while prices rebound the day following a trading halt, markets experience larger swings in prices over a longer period, which is generally seen as a bad thing.

And just because the halts have led to rebounds in the past doesn’t mean they’ll keep doing so.

4. So why not just shut down markets for a while?

The president does have the power to shutter markets in response to a crisis such as the COVID-19 pandemic.

In fact, the markets have been closed many times due to war, victory, deaths of presidents, the celebration of historical events of significance like the Moon landing and disasters, both natural or man-made. For example, the NYSE shut down for the week following the 9/11 terrorist attacks and closed for two days during Hurricane Sandy in 2012.

The longest shutdown on record was during World War I, when the the NYSE closed for four months beginning in July 1914.

Normally, however, the market remains open as much as possible even during periods of financial crisis, and the management of each exchange is responsible for determining whether there will be trading that day or not. The government, however, has broad powers in regulating commerce during national emergencies, which includes the ability to order a shutdown.

So should President Donald Trump order one?

There’s actually no research that I’m aware of on the efficacy of closing down stock markets during crises. But it’s important to understand that even when markets are crashing, investors usually prefer them to stay open so they can continue to trade.

Moreover, the U.S. holds a principal place in the financial world as a strong and active market for trading securities. If the market is closed too long, or for capricious reasons, it can give the signal that American markets are not free of government intervention and that they are unreliable.

While temporary halts to trading gives market participants time to parse information and make more levelheaded decisions, a shutdown could cause real damage to U.S. investments in the long run if they’re seen as less of a haven to global investors.

Jonathan T. Fluharty-Jaide is Assistant Department Chair and Professor of Finance at the West Virginia University.

The Conversation publishes knowledge-based journalism that is responsible, ethical and supported by evidence from academics and researchers in order to inform public debate with facts, clarity and insight into society’s biggest problems.

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RAGE is Latest Venue to Fall Victim to the Pandemic



Another LGBTQ+ Nightlife Destination Has Fallen Victim to the Pandemic

WEST HOLLYWOOD (L.A. Magazine) — Rage nightclub has been a destination for LGBTQ+ nightlife in the bustling Santa Monica Boulevard corridor of West Hollywood for decades. Now, nearly 40 years after first opening its doors, the club has announced it has permanently closed, yet another local business to collapse amid the COVID-19 pandemic.

Rage nightclub management lays some portion of the blame on their landlord, Monte Overstreet. The club’s now-former general manager, Ron Madrill, told Q Voice News that rent for the location was already “very high” prior to operations shutting down in March. He says he believes an impasse over rent payments may have contributed to Rage’s closure.

Overstreet also reportedly owns the space formerly occupied by neighboring bar Flaming Saddles Saloon, which also announced […]

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21 Workers Test Positive for Coronavirus at Rock n Roll Ralphs



Workers protest outside Ralphs in Hollywood where 21 have tested positive for coronavirus

HOLLYWOOD (KTLA) — Workers rallied Friday outside a Ralphs store in Hollywood where 21 people have tested positive for the coronavirus.

The group called on the store to take more aggressive action when staff test positive for the virus, and to ramp up efforts to protect the grocery store employees, who are considered essential workers on the front lines of the pandemic.

They said they speak for thousands of workers who are afraid they aren’t getting enough protection as the virus continues to spread countywide, infecting more than 24,000 as of Friday.

The Ralphs at 7257 W. Sunset Blvd. has had an outbreak involving several workers who tested positive for the virus, according to the Los Angeles Department of Public Health, which lists businesses and […]

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‘Stay Put, Order In’ and Dine With Friends on Zoom, Says Mayor



WEST HOLLYWOOD — WeHo is home to some of the best restaurants in the world and our community members are used to gathering around restaurant tables and enjoying meals together. Now, there’s an opportunity to, instead, gather around kitchen tables at home and enjoy a meal (or many!) while supporting our local restaurants.

“One of the worst things about the Safer At Home directive is being disconnected from friends, neighbors, and the city around us,” said City of West Hollywood Mayor John D’Amico. “Don’t be alone if you don’t have to be – take advantage of the technology out there and invite a friend to Zoom in for Ziti or share some Farfalle over FaceTime.”

Mealtime is a wonderful opportunity to connect with friends, family, and loved ones using virtual teleconferencing technology, while partaking in your favorite delivered or takeout food.

City Encourages Residents to Support Local Restaurants During Safer At Home Orders

Many West Hollywood restaurants remain open and are offering takeout, curbside, and delivery meals, which are sensitive to social distancing during the emergency. The City of West Hollywood and the West Hollywood Chamber of Commerce have teamed up to offer a directory of “Stay Put, Order In” eateries in West Hollywood, which is accessible by (click the “Stay Put, Order In” link!) or This list is updated daily.

“We need to start hanging out together, and talking, and seeing each other again. So, why not plan to #WeHoDinnerConnect this week – maybe Saturday at 8 p.m.? Or Sunday at 7 p.m.? Or even just 15 minutes of screen-to-screen gossip,” said Mayor D’Amico. “And you don’t have to cook a thing… local restaurants have meals and menus tailored to take-away choices and they’re ready to send food over to your house or make arrangements for you to pick it up.”

If picking up food, remember to wear face coverings, which are required to enter essential businesses.

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