2022 has been painful for investors and things could get even worse as we enter the most dangerous week of the year, an expert warns. Past crashes in October offer a dire warning.
Many investing legends have warned of a crash this fall, including Michael Burry, who predicted the financial crisis and was immortalized in Hollywood film The Big Short, and fund management guru Mark Mobius and Nobel Prize-winning economist Nouriel Roubini.
The next few days could be tough for investors if history is any guide, says analyst Clive Hale of Clive Hale Consulting.
The war in Ukraine, the energy shock, a slowdown in China and the recent collapse of the gilt market cast long shadows.
The global economy is on the brink of recession, while rising interest rates are squeezing consumer spending and global real estate prices.
OPEC’s decision last week to cut oil production will drive up fuel prices, adding pressure on Western economies. Oil is therefore heading above $100 a barrel.
The US dollar is getting stronger and stronger, increasing pressure on countries that have borrowed money in dollars rather than their own currency.
The list of problems seems endless, says Hale. “We have also seen attacks on the Nord Stream pipeline, bridge explosions in Crimea and the problems plaguing Credit Suisse, Nomura and interest rate derivatives. I could go on…”
READ MORE: Gold price crash – safe haven in ‘It’s not supposed to happen’ collapse
Hale said financial markets tend to show extreme volatility around mid-October.
The stock market panic of 1907, the Wall Street crash of 1929 and Black Monday of 1987 all escalated by the end of the month.
The Wall Street Crash had its worst day on October 24, 1929, called Black Thursday.
In October 1987, global stock markets suffered a sudden, unexpected and still largely unexplained crash on October 19, known as Black Monday.
In 1929 and 1987, markets went through two waves of selling and recovering, before the crash, Hale said. “Third waves tend to be the most dramatic to add a bit of spice, like it’s needed.”
Another warning came with the collapse in the price of copper, which fell 20% last year and is now falling again.
The key industrial metal is known as Dr Copper as it takes the temperature of the global economy.
DO NOT MISS :
What the financial crisis means for you – “everyone is terrified” [WARNING]
Triple state pension lockdown is Liz Truss’ ‘bone of contention’ [REVEAL]
Pension payments will hit £200-a-week but rate hike ‘less clear’ for the million [INSIGHT]
Demand for copper is falling as the global economy slows, says Fawad Razaqzada, market analyst at City Index. “Further losses could be on the way.”
Other experts have warned of the “October effect”, but history suggests the month isn’t the scariest of the year.
That dubious honor goes to September, when US stock markets fell an average of 0.5% that month, according to a date dating back to 1950.
In contrast, shares in October actually climbed 0.9% on average.
December is the best month of the year with an average monthly increase of 1.60%.
November and April are also strong months.
Still, with Russia’s nuclear threat, investors will be happy to get through October without things going from bad to worse.
So maybe we can look forward to December.