– Next Wall Street Crash looms? Lessons on anniversary of crash
– 30 years since stock market ‘Black Monday’ crash of 1987
– Dow Jones Industrial Average fell 22.6% on October 19, 1987
– S&P 500, FTSE and DAX fell 20%, 11% & 9% respectively
– Gold rose 24.5% in 1987 (see chart), acting as safe haven
– Prior to crash, stocks hit successive record highs despite imbalances
– Imbalances that lead to 1987 crash are much worse today
Editor: Mark O’Byrne
Gold prices in USD in 1987 (LBMA AM)
Last week markets wobbled somewhat on the 30th anniversary of Black Monday with a 2017 version of an iffy day’s trading. The S&P 500 posted it’s biggest post-midnight drop on Friday, but went onto finish the day with yet another record close.
Prudent traders and investors are growing increasingly uncomfortable with the increasing “irrational exuberance” in markets. We are repeatedly seeing new record highs in U.S. stocks and yet trading volume and volatility remain suspiciously low.
Many are asking how long this situation can go on for? Especially given the significant macroeconomic risk in the form of a massively indebted U.S. and western world and heightened geo-political risk.
The Black Monday of 1987 is firmly etched in markets’ histories. Few came away unscathed. It is generally remembered as something akin to a bloodbath that few wish to repeat.
But a repeat of that crash looks more and more likely by the day. None of the factors that pushed the markets to react in such a way are particular to 1987. They all exist today, arguably on a grander and more dangerous scale.
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