Fresh from a long weekend for most states (and the ASX), many investors would have experienced a rather firm trip back to reality this morning when the Australian share market opened.
The S&P/ASX 200 Index (ASX: XJO) last closed at just a tad over 7,000 points on Friday. But today, the ASX 200 index has plunged a painful 4.7% so far today and is now approaching 6,600 points.
It’s been a brutal day of selling so far. Blue-chip ASX shares are falling, including Commonwealth Bank of Australia (ASX: CBA) down 4.8% and BHP Group Ltd (ASX: BHP) down 6.2% at the time of writing.
So after such a decisive plunge, many investors might be wondering if we are now in a stock market crash. It’s certainly beginning to feel like one.
Is the ASX 200 in a stock market crash yet?
Let’s see if we can officially apply this dreaded moniker.
A share or stock market crash isn’t just an arbitrary event. It is generally accepted that for a market downturn to be called a stock market crash, it must involve a fall of 20% or more from the most recent market peak. A ‘correction’ is a fall of 10% or more.
So the ASX 200 last peaked at 7,632.8 points back in August 2021. Today, the ASX 200 hit a new 52-week low of 6,566.1 points. That represents a drop of 13.98%. So a painful correction, one could say.
But we aren’t actually in stock market crash territory just yet. To be in a crash, the ASX 200 would have to descend to around 6,106 points. And (thankfully) that is a level we have yet to cross.
The last true stock market crash was the infamous ‘COVID crash’ of 2020. In the space of just a few weeks, this crash saw the ASX 200 lose a gut-wrenching 32% of its value over March and April 2020.
That’s what an extremely rapid and painful stock market crash looks like. The current ‘correction’ we are experiencing could get worse, of course. But as it currently stands, the ASX 200 is still avoiding a full-on crash.
No doubt investors will be hoping that the rest of the trading week gives ASX 200 shares some breathing room. But we shall have to wait and see.