There's a bunch of youngsters who are always caught out when markets go down like this. This isn't new, it's just the downdraft of a new generation.

Too many people think "this hasn't happened before." It has. The causes are localized to the situation at the time, but the formula always involves one ingredient: leverage. It was true in 1792, 1819, 1837 (that's a good one to read about), 1857, 1884, 1893, 1896, 1901, 1907 (a big one), 1929, 1962, 1973-74, (and the rest of the 1970's), 1987, 1989, 1998, 2000-2001, 2008, 2020...

You can see from that list that market panics are not infrequent.

When interest rates are low, some "professional" traders love to use cheap leverage to create huge, outsized gains. What is more profitable than buying 10,000 shares of a stock? Buying 100,000 shares of that stock. How do you do that? Leverage.

Here's the Fed's view of hedge fund leverage:

https://www.federalreserve.gov/publications/November-2024-Leverage-in-the-Financial-Sector.htm

Please search for the phrase: "Hedge funds' leverage"

and start reading. You see that there's a lot of leverage lending going on out there.

In a perfect world, we would much more tightly regulate the financial markets.