Key Takeaways:
- Economists and investors warn of a possible stock market crash in the coming weeks.
- Recent market developments and geopolitical events could send markets tanking.
- Experts have found similarities between the markets today and the 1987 crash.
YEREVAN (CoinChapter.com) — A new stock market crash could be on the card!
The S&P 500 has made history with a remarkable 15-week streak of positive returns on Mondays. This marks a record that hasn’t been seen in over 50 years. While it might seem like excellent news for the stock market, investors are beginning to warn this extraordinary winning streak could spell trouble.
The concerns brewing among investors are not without merit. While a winning streak can undoubtedly indicate a robust market, it can also indicate excessive exuberance and complacency.
Here’s why some market participants are nervous about a possible stock market crash.
Historical Precedents of Stock Market Winning Streaks
Looking back at some of the previous record-breaking streaks, one cannot help but be worried. Significant market downturns often followed these. It’s not a law but a pattern that has been observed, and history tends to repeat itself.
Thirty-six years back, on Oct. 19, 1987, the Dow Jones plunged by a staggering 22.6%, shedding 508 points. This event sent shockwaves across the markets, earning the name “Black Monday.”
Now, experts warn that we could repeat the 1987 situation.
Meanwhile, there have been other devastating stock market crashes in history. Here are the major Dow Jones losses other than the infamous 1987 stock market crash over the years.
Dec. 18, 1899: Amidst the challenges of the late 19th century, the Dow Jones experienced a -12% drop on Dec. 18, 1899.
Dec. 14, 1914: Hitting just months after the start of World War I, the Dow Jones saw a massive one-day decline of 20.5%. Amidst the chaos of the war, the drop had a significant impact on the financial markets.
Oct. 28, 1929: Another notorious date in the history of financial markets, Oct. 28, 1929, is remembered for a 13.5% drop in the Dow Jones. This dip is particularly significant, as it occurred just days before the notorious 1929 stock market crash.
Oct. 29, 1929: The Dow Jones faced another substantial decline just a day after the above significant October 28th drop. This time, the index tanked by 11.7%. The drop kickstarted the Great Depression, with long-lasting economic repercussions.
Oct. 5, 1931: During the Great Depression, the Dow Jones registered a 10.7% drop. Economic hardships during this era took a toll on the financial markets.
Mar. 16, 2020: On this day, the global financial markets faced a major downturn, with the Dow Jones declining by 12.9%. The COVID-19 pandemic and economic uncertainties played a role in this significant drop.
Mar. 12, 2020: In the wake of the COVID-19 pandemic, the Dow Jones saw a significant 10% drop. This decline was part of the market’s reaction to the global health crisis’s uncertainties.
Some factors that could cause a stock market crash
Several concerning factors in the current economic landscape raise questions with economists about the stability of financial markets.
Third-Quarter (Q3) Market Decline:
The decline experienced during the year’s third quarter has sparked concerns among market watchers. An A3 market decline can come as a warning sign. It sometimes indicates increased volatility and uncertainty in the market.
Rising Interest Rates: The Federal Reserve’s decision to constantly raise interest rates has attracted significant attention. Higher interest rates impact borrowing costs. They also have a bearing on corporate profits and consumer spending.
Elevated Inflation: Ever since the outbreak of the COVID-19 pandemic, inflation has remained a concern. The persistent and rapidly rising prices can erode purchasing power and impact consumer spending. Inflation also prompts central banks to consider measures to control inflation. Such measures may include further interest rate adjustments. Economists perceive this as a possible sign of an upcoming stock market crash.
Geopolitical Conflicts: The ongoing war in Ukraine, caused by the Russian invasion in early 2022, has already disrupted supply chains and impacted global energy prices. With the Hamas-Israel conflict renewed, geopolitical conflicts threaten further uncertainty in the markets.
Collectively, these factors have led to discussions about whether the current economic conditions resemble the events leading up to Black Monday in 1987.
It’s important to note that while there are parallels, there are also significant differences, including the state of the S&P 500 and interest rates. This suggests that while concerns exist, the market’s fate may not necessarily mirror the 1987 stock market crash.
