Sete momentos mais marcantes de Centeno no Banco de Portugal

[Surfer]

The stock market crash of 1929 did not cause the Great Depression. This is why the stock market crash in 1987 was not followed by a second depression. What caused the spectacular crash in stock market prices in the early 1930s was the continuous slide in the American economy and the rest of the world as trade, industrial output, the banking system and other pillars of the economy gradually collapsed.
The reason 1987 did not lead to an Ursa Major of the 1929-1932 variety, despite the similarities between 1987 and 1929, is that none of the five factors discussed above was present in the world's stock markets in 1987 and after. There was no political or economic crisis that would undo confidence in financial markets, no inflation that was building up. If anything the world's stock markets were at the beginning of a bull market, not the end.

Although Wall Street pundits were quick to draw the analogies between October 1987 and October 1929, to my knowledge no one put world stock markets in their historical perspective. If they had, they would have realized how different 1987 was from 1929, not only in fundamental economic terms, but in terms of the world's stock markets as well. By no stretch of the imagination was 1987 at the conclusion of a secular top which had been building in the world's stock markets for a decade.

What reason do we have to believe that we could repeat the decade of the 1930s?

A spectacular stock market bubble has just burst, sending technology and other high-flying stocks reeling. The NASDAQ composite fell from a closing high of over 5000 in March 2000 to an intraday low below 1400 in September 2001, a decline of over 70%. 1999 was the best year in history for any stock market index in US history when the Nasdaq rose by 85%, only to be followed by a decline unparalleled since the 1930s.

World stock markets have all suffered large declines since the world market top in 2000. The MSCI World Stock Market Index fell by over 40% between March 2000 and September 2001, the worst decline in the World Index since the 1973-1974 bear market.

A number of world markets remain below the levels they were at years ago, replicating the situation in the 1920s in which some markets peaked at the beginning of the decade and others peaked at the end. The Taiwan and Japan stock markets have never returned to their highs of 1989, and the Korea stock market, despite rallies to the 1989 highs in its 1994 and 1999 remains below the 1989 levels. In 2001, Singapore's All-Share Price Index was at levels it had first reached in 1981. Finally, MSCI's Emerging Market Free Index has never returned to the highs it hit in 1993. This reminds us that not every market participated in the bull market of the 1990s

We should remember that no one can accurately predict the future. Very few economists or Wall Street pundits can even explain what happened in the past, so it is difficult to predict what is going to happen in the future. Predictions are based upon probabilities, not facts, so the question might be rephrased, does the market's current behavior portend a continual decline, or lack of recovery, in the market with a high probability in the near future?

First, could the current economic recession turn into a world depression? It should be remembered that stock markets in the 1930s did not decline of their own accord. There were collapses in financial markets, implosions in world trade, deflation and collapses in commodity prices, and other economic, financial and political problems. Although the world's economies are slowing down, and the world is likely to suffer the first decline in world GDP since the 1970s, the real question is how quickly can the world economy recover from the recession?