After seeing a big downdraft on the stockmarket Friday, can we see a ‘Black Monday’: Could It Happen Again?
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| Black Monday: Could It Happen Again? |
‘Black Monday’: Could It Happen Again?
The directors of S&P 500 committee at Standard and Poor’s, talked with media on Friday and told them, “We could get to a point where everybody decided that the world was incredibly over-valued and the only thing to do was to sell,” he said.
“We do have circuit-breakers and in theory they would work very well, but the human psychology that was around in 1987 is still around today and that is that everybody can suddenly change their mind and the result can be a massive crash.”
Before we go asking ‘Black Monday’: Could It Happen Again? We have to remember that back in 1987, trading predominantly happened on the floor of a particular exchange, human fallibility was a threat — and it still is.
“We weren’t safe from the human element then and I don’t think we’re safe from it now,” he said.
Although global stock markets and trading have become highly technical and computerized over the last 25 years, the absence of the human element has not meant that glitches have become rare.
The market dynamics have also changed. Think back to a few years ago to when we witnessed the so called, 'Flash crash' where everything went down and came back up again. So things can happen much more quickly than they used to. … I think the danger is still there.”
“What we’ve really learned in the last five years is that just about anything can happen again. We didn’t expect a recession like the Great Recession, we didn’t expect to see a financial crisis, but we got them.”
‘Black Monday’: Could It Happen Again? Well, there is really no way to know. However as stated we should always be expect the unexpected, and trade accordingly.
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