Thirty years ago this week (October 19th 1987), markets experienced their most volatile day ever as share prices went into a free-fall. The Dow Jones Industrial Average fell by 508 points, equivalent to 22.6% of its total value, while the S&P 500 lost 20.5% of its value. The sell-off began in Asia, and the stampede continued in markets from Tokyo to New York.
The question everyone is asking is another downturn inevitable? Will history repeat itself this October? Experts point out that having hosted some of the greatest market shocks of all time, October has a reputation for being a dangerous month for investors. But should investors be worried about history repeating itself?
Mark Taylor, Chief Customer Officer at online investment platform, Selftrade from Equiniti said: “Another downturn is inevitable but calling it is no easy feat. If we look back at some of the triggers that have caused markets to tumble before, we can certainly see some warning signs are flashing red.
“Significant valuations are a common theme before a market crash and as we’ve seen this month, markets are hitting new highs each day – it’s difficult to see how much longer this can go on. We’re also seeing other indications including increasing uncertainty on a global scale. Hurricanes, the situation in North Korea, concerns over the Chinese economy, Brexit and now the revelation that the US is over $20trillion in debt it is a lot for investors to take. Against this backdrop, investors are offloading riskier assets in favour of safe havens such as gold and the yen. These movements could suggest that investors are hedging their bets for an equity slide.
“But we know that the markets don’t work to a schedule, and calling the top of the market is nothing short of a mugs game. While it could be one of these triggers that sparks the next market correction, it could also be something else entirely.”
