Wells Fargo sees parallels between US stocks now and before the 1929 crash

Posted on 01 February 2014 with no comments from readers

Experts debate the outlook ahead for US stocks after the worst month in over a year. After the 30 per cent surge in the S&P 500 last year and spike in December there could be a rough ride ahead.

The marketplace is ‘overly long’, explains Rick Bensignor of Wells Fargo Securities. Mr. Bensignor thinks 2013’s December 31st high ‘potentially very much lines up’ with the peak in September of 1929.

The great depression which gripped the entire world followed by the crash of millions of shares in the US stock exchange continued for almost a decade before the world again started to reassure on its legs. The economy and industrial development plunged into darkness when the investors were trapped in the well of losses. The downturn came as a tragic surprise after the market scaled a peak in September and there were valid reasons for the market to show the grey side.

The US market is again breaking down and learning from the previous mistakes is the only hope to averse to an economic meltdown again. Among the various background reasons that led the stock market to crash from the peak was the unhealthy practice of speculative trading. Speculation can earn high profits in a very quick duration but is extremely short-lived and leads to an imbalance in the further market growth. If the speculation is based on some real facts like the case of mass hugging of trading robots after a highly positive Qprofit System review, then a drastic nosediving can be avoided.

Low wages or underpaying has been an issue then and is now also, which can reduce the purchasing power of investors and their ability to recover from losses. The other scenarios have also not changed much. Most of the countries are in the phase of development with more debt funding rather than surplus income and sectored division is still going strong, except for the special schemes for priority sectors. Agriculture still forms the foundation of economic pyramid but continues to reel under pressure.  The modern-day challenges add to the burden on the market and a depression cannot be overruled now by drawing these comparisons to the 1929 event.

What have we been talking about? Not many of us in the current generation witnessed this event for real but we do know the subject through our reading and its frequent remembrance by the market. Any newspaper cutting with historical importance in your economic custody?

Remember the Wall Street Crash of that October/November? Stocks initially fell by 15 per cent. Ryan Detrick of Schaeffer’s Investment Research, provides perspective…