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MarketWatch 25 Years: MarketWatch Moments: How the new tools of monetary policy and the rise of China changed markets


We are marking MarketWatch’s 25th anniversary by looking at the 25 biggest financial market events and developments we have covered. In the early years, we recounted five big events and how technological innovation helped produce online brokers, the rise of the day trader, and the IPO boom and bust. The following crisis era brought us five earth-shattering market events including the subprime debacle and the collapse of Lehman Brothers.  

After the financial storm, a new post-crisis period emerged with a set of issues and trends that helped recalibrate the markets. Many of these developments trace back to the financial crisis. But other events were the result of dynamics that had been brewing for years. Here are events 11 to 15 of MarketWatch’s top 25 market events of the last 25 years.

11. Europe’s debt crisis and the near-death of the euro

Taxi drivers marching in Athens during the height of the European debt crisis.

AFP via Getty Images

European officials were quick to lay the blame for the global financial crisis at the feet of out-of-control banking systems in the U.S. and U.K. But it wasn’t long before homegrown problems thrust the Continent into a crisis of its own that caused untold economic suffering, political, and social unrest; and nearly destroyed the euro.

The problems began in 2009 as a new Greek government revealed that the country had been running much larger budget deficits than previously disclosed. The pain spread, with countries such as Ireland and Spain seeing their previously sound fiscal records undone by the collapse of massive property bubbles. Shackled to a shared currency, devastated economies were forced to embark on internal devaluations in an effort to regain competitiveness.

A “doom loop” became the central feature of the euro-zone debt crisis, which came to a head in 2012 as borrowing costs for Spain, the eurozone’s fourth-largest economy, and Italy, the region’s third-largest, soared. The climbing yields on sovereign debt issued by stressed eurozone countries also reflected fears of “redenomination,” in which a country could leave the euro and see its creditors repaid in reconstituted pesos, drachmas or lira. That led to a bold move by European Central Bank President Mario Draghi, who delivered an unscripted pledge in a London speech in July 2012: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” he said.

The ECB proceeded to fashion an emergency bond-buying program that went well beyond anything it had used previously. The program, known as outright monetary transactions, or OMT, was never used, but its existence, and the accompanying formation of a eurozone bailout mechanism, served to calm the storm. But it wasn’t the end of the story. A showdown over another Greek bailout in 2015 again raised the specter of a country exiting the euro, and the ECB is currently scrambling to come up with a new “antifragmentation” mechanism that will serve as a backstop to keep yields for more indebted countries from soaring as it begins lifting interest rates in response to inflation.

12. The new tools of monetary policy 

Former Federal Reserve Board Chairman Ben Bernanke

Getty Images

When the U.S. plunged into the 2007-2009 Great Recession, the dawn of a daring new age emerged at the Federal Reserve. One whose credo remains controversial to this day.

Out was the Fed’s conservative approach to managing the economy. In was a novel and aggressive effort to stimulate growth and a new-found openness at the U.S. central bank that was often invisible to the public.

The first big shift came in 2008. Worried that short-term interest rates near zero weren’t doing enough to revive the economy, the Fed adopted a strategy that became known as QE, or quantitative easing. The Fed began to buy government bonds and private securities composed of large numbers of home mortgages bundled together. These purchases eventually ran into the trillions of dollars. The goal: To flood the economy with money, drive down long-term interest rates, spur lending and encourage investors to buy riskier assets such as stocks.

The Fed has used QE repeatedly in the years that followed, most recently during the coronavirus pandemic. Its balance sheet has ballooned from under  $1 trillion before the Great Recession to $9 trillion.

The second big change: The use of so-called forward guidance to keep interest rates from rising as the economy improved. For the first time ever, the Fed would explicitly tell investors what it planned to do and when.  

The final tool in the Fed’s new toolkit was an effort to engage with the public, a huge change from a historically secretive central bank. Chairman Ben Bernanke in 2011 began to hold regular press conferences to explain the bank’s actions.

Has it worked?

Supporters contend the Fed’s makeover boosted the economy and saved it from tougher times. Critics argue the bank’s decisions more than a decade ago laid the seeds for the current bout of inflation — the highest in 40 years.

13. The Flash Crash

Flash Boy: British trader Navinder Singh Sarao

AFP via Getty Images

It was a 21st century crash. Around 2:32 p.m. in New York on May 6, 2010, the stock market suffered a short but jarring plunge. The Dow Jones Industrial Average suddenly extended a fall by 600 points before recouping most of the drop in minutes. At the worst of the afternoon freefall, major stock indexes were all down 8%.

Eerily, there was nothing to hang the plunge on: no sudden geopolitical disaster, no hawkish pronouncements from the Federal Reserve, no news that could be seen as a catalyst. While the indexes tumbled, the carnage in individual stocks was even more alarming. Shares of Accenture, for example, dropped from around $38 to a mere penny in a two-minute stretch, though such trades were later voided. The incident rattled brokers, exchanges and regulators.

A few months later, a joint report by the Securities and Exchange Commission and the Commodity Futures Trading Commission blamed a large fundamental trader, who they didn’t identify. The regulators said the trader executed a large sell order — valued at roughly $4.1 billion — using an automated execution algorithm at a time in the afternoon while the markets were already very stressed. The report concluded that combined selling pressure from the huge order drove high-frequency traders to drive down the price of the E-Mini S&P 500 futures market at the same time as it drove the liquidity providers and market makers to withdraw from individual stocks.

In 2015, a U.S. grand jury indicted Navinder Singh Sarao, a London-based futures trader, on charges related to the crash. Described in court papers as autistic, he was convicted and in 2020 sentenced to time served and a year’s home confinement. Meanwhile, individual stock circuit breakers and new rules were put in place that aimed at preventing the sorts of liquidity evaporations that were seen contributing to the downdraft, while researchers have questioned the role high frequency trading plays in markets.

14. The Rise of China

Ben Stansall/Agence France-Presse/Getty Images

In 1999, Foreign Affairs, the august international-affairs journal, could credibly, if controversially, ask, “does China matter?” But over the next decade, China became a very meaningful part of MarketWatch’s coverage. To our readers, China mattered — a lot.

China’s rise, particularly as an economic superpower, was something no investor could ignore. While dealing with inevitable growing pains, China overtook the U.S. as the world’s largest auto market, surpassed Japan as the world’s second-largest economy, and served as a crucial engine of growth, providing economic stimulus during the financial crisis that helped pull the global economy back from the brink. China’s transformation was built around becoming an export powerhouse, dependent on global growth.

By becoming the final assembly point of much of the world’s goods, China was at the center of a backlash against globalization. Tussles over the weakness of its currency and tactics served as flashpoints for controversy. In 2017, President Donald Trump opened a full-fledged, high-stakes  trade war against China that frequently dominated markets. President Joe Biden continues to weigh whether to roll back some tariffs.

The U.S. Securities and Exchange Commission, meanwhile, has a list of more than 250 Chinese companies, including e-commerce giant Alibaba, that could face delisting on Wall Street due to failure to comply with financial-auditing requirements. Meanwhile, U.S.-China tensions have escalated, with China angrily denouncing a visit by U.S. House Speaker Nancy Pelosi in August as fears rise that Beijing could eventually move to invade the self-governing island it views as part of its territory.

15. The Facebook IPO

Facebook founder Mark Zuckerberg is seen on a screen in Times Square moments after he rang the opening bell for the Nasdaq stock market.

Getty Images

In May 2012, the initial public offering of Facebook made history, with the tech giant becoming the first company to go public at a $100 billion valuation. The Facebook IPO was such a big deal that Nasdaq moved its opening bell ceremony to Facebook’s California headquarters, where Mark Zuckerberg cheered with hundreds of his employees.

It was the most anticipated IPO in years. The IPO market had been in a funk since the financial crisis and bankers were counting on Facebook to bring back interest in big tech deals.

For years, Zuckerberg staved off the IPO by enticing big players to invest privately in Facebook at sky high valuations. The delay led to grousing and departures among employees, and some commentary from MarketWatch that perhaps Zuckerberg had waited too long. Waiting also made it unclear how much Facebook was truly worth.

On the day of the IPO, in which the company raised $18 billion, MarketWatch curated a dedicated page to showcase all the staff coverage, with one analyst comparing the event to Halley’s Comet. MarketWatch’s financial and tech columnists were united in skepticism about the deal, based on its founder control, inconsistent financials and slowing growth rates. There were serious questions about Facebook’s ongoing transition to mobile.

The IPO day turned into a flop. The underwriting investment bankers rushed in during the trading day to support the stock and keep it from falling below the $38 offering price, amid technical glitches at the Nasdaq and an ultimate consensus that there were too many shares issued by greedy investment bankers and the company. Facebook’s shares closed that day at $38.23, just 23 cents above its IPO price.

In the following months, critics blasted Facebook and its stock traded 30% below the offering during its first year of trading. But those who doubted Facebook long-term turned out to be wrong. Faceboo, now known as Meta Platforms
successfully made the transition to mobile, sparking a run of incredible growth, and Facebook set the standard for private market fundraising that dominates Silicon Valley today.

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