The U.S. stock market may be going through what is called the October Effect, a phenomenon that has caused many of our market crashes. If you look at the market's history, crashes tend to happen within the same monthly period (mid-September to mid-October every 10-15 years). It usually takes a couple years after this for the economy to return to normal before spiraling out of control again, culminating in a crash that mysteriously tends to take place in early Autumn. Just for fun, let's point out that this time period astrologically coincides with the "balance" sign Libra, symbolizing a stabilization of the market to moderate an overly productive economy.
It happens because the market is cyclical. There comes a point when it is so strong that people become overconfident in their budget. They lend, borrow, buy, and hire more than they should during these bear market bubbles. Market crashes have nothing to do with the political party in control, or the president in office, as I once believed. The role of a crash is to reset the economy, to recover it from the massive influx of invisible moneys pouring through the cracks in our system. If you follow the money trail, it leads right to the Federal Reserve's interest rate, a limitation our government makes to central banks on what they're able to lend. But it's important to realize the Federal Reserve was designed to curtail crashes like these, not to design them itself. This is not a worldwide conspiracy for bankers to garner profits (as I also once believed). If it doesn't outright prevent crashes, it at least helps make them less severe. Without lending restrictions, a second Great Depression would likely be imminent, as the banks would lend with reckless abandon money they don't have.
A more important measure indicating that a crash is imminent is the strong correlation between crashes and the unemployment rate. A correlation implies a contributing factor, not necessarily a cause. The unemployment rate right now is extremely low, similar to all the rates they were at right before massive layoffs caused them to skyrocket. All you have to do is look at a graph of historical unemployment and line up the well-known market crashes with it to notice that a big dip in unemployment tends to occur before a crash.
So why do the vast majority of market crashes happen in Autumn? The time between summer and Christmas is a nice little window of opportunity for people to save money. People tend to spend more in summer (vacation, home improvement) and Christmas (gifts, year-end sales), leaving early fall vulnerable to massive selloffs. Based on this, one might surmise that doing away with mass-consumerism during Christmas might prevent the effect entirely.
Events happening in the world also pay a role, though to a lesser extent. September 11 was thought to contribute to the 2001 downturn, while currently it is the trade war with China being blamed for shaking up investors' confidence. To me these are incidental; the market is far more influenced by the ingrained cycle than some idiot's Twitter feed. Events and fears are certainly critical to the severity of panic, but the core is in cyclical confidence based on our seasonal structure. The October Effect is a psychological one, but it's not based on fear of the past reoccurring, as many analysts believe. It's based on the runaway confidence that a bear market exudes, and the need to save a few dollars in between the massive spending sprees of summer and Christmas.
Admittedly, my worriment is probably a symptom of this October Effect- a fear of losses causing an initially massive sell-off, which snowballs into greater sell-offs once other people catch on. In that regard it's like a virus in the way it spreads as a contagion to stockholders, and it seems I have caught it. But this isn't the only symptom. October would be too random of a month if it were merely a psychological effect. It's literally like saying the star sign Libra is causing people to "return balance" to the market. The bane of my sign!
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