Reagan didn't care much for deficits either. The stock market felt an enormous surge today, and just like under Reagan, the bull is dancing on thin ice.
On an online MSNBC poll <
http://www.msnbc.msn.com/id/7088661/#survey>, people were surveyed with the following question: The Dow Jones industrial average is just shy of 11,000 and at a multi-year high, so where will the stock market go from here?
The choices and results are:
- I'm bullish. The Dow's going above 11,000 and it's staying there. 57%
- This is about as high as we'll get this year. We're going lower. 25%
- I'm staying on the sidelines and holding on to my cash. 16%
Well, this seems to be the same feeling investors and the general population got around 1986 when the stock market started feeling randy. In 1987 though, the stock market crashed, and hard. Black Monday, on October 19, 1987, the Dow Jones Industrial Average lost 22.6% and the Nasdaq Composite lost 11.3%. This was the largest loss in the history of the stock market. This event also set the stage for an impending recession that George H.W. Bush mostly had to deal with.
What were the causes of this stock market crash? Well, take a look at the following possible reasons for the crash, many of these will sound very familiar....
- Rapidly increasing short term US interest rates
- Rapidly increasing long term US interest rates
- Deteriorating US current account deficit
- Escalating US government debt
- Very high price-earnings-ratios
- Very low dividend yields
- Very bullish investor sentiment figures (see above)
- Deteriorating "market breadth"
- U.S. Trade deficits
- Overevaluation of stocks (which starts now)
- An increase in SEC investigations
Still feeling comfortable?
SOURCES:
http://www.sniper.at/stock-market-crash-of-1987.htmhttp://hnn.us/articles/895.htmlhttp://www.investopedia.com/features/crashes/crashes6.asp