Stocks are how corporations get cash to grow their businesses. Raising Capital At any stage of development, various sectors of the economy need long-term capital to grow. Program trading has grown to the point where it's replaced individual investorsgreed, and panic as causes of crashes. Firstly, compensating managers based on stock performance or in company shares aligns the interests of managers with investors.
They were afraid more financial institutions would go bankrupt the way Lehman Brothers had. When they go up again, as they always do, you will profit from the upswing in stock prices.
What Not to Do in a Crash During a crash, don't give in to the temptation to sell. Almost 70 years later, it happened again in and stayed above that level for nearly 5 years as the dot-com bubble deflated.
Setting expectations Valuations can be helpful for setting reasonable expectations for investors because higher valuations typically lead to lower long-term returns while lower valuations typically lead to higher long-term returns.
Likewise, governments need funds for infrastructure investments. In other words, other agents will take over the enterprise and turn it around for better value creation if the managers do not perform well.
Liquidity gives the investors in publicly-traded shares the peace of mind that they can sell their shares whenever they want to exit their investments. That means more layoffs. Causes Frightened sellers cause a crash.