NOT IN 2017.
Wall Street unlikely to be haunted by a crash this month
October has a sinister reputation on Wall Street. Stock market crashes in 1929 and 1987 are mostly to blame. But doomsday predictions for equities this October are conspicuously absent.
Indeed, instead of spreading a message of doom and gloom, portfolio managers and investment strategists interviewed by USA TODAY are calling for continued gains for U. S. stocks and downplay the risk of a big fall in equity prices.
The optimistic market call has been correct — so far.
In the first four trading days of Octo- ber, the U. S. stock market has been in rally mode. The Dow Jones industrial average has closed higher each day, notching its 43rd, 44th, 45th and 46th alltime highs of the year. The blue- chip average is up more than 15% in 2017 and is within 255 points of 23,000.
In another sign of strength, the Standard & Poor’s 500 stock index has posted record closes six consecutive sessions, its longest string since 1997, S& P Dow Jones Indices says.
The sizable gains have come despite fears of a U. S. military confrontation with North Korea, President Trump’s stalled economic agenda and a market that has become pricey relative to earnings.
The basis for the bullish trading action boils down to two things: First, the record- breaking market is being supported by improving business conditions around the globe, which bolsters the earnings power of publicly traded companies.
Second, there are few present signs of traditional bull market killers, such as wildly overvalued stock prices, overly optimistic investors, rapidly rising interest rates and contracting economic growth.
“Most of these ingredients that cause market meltdowns are missing,” says Peter Cardillo, chief market economist at First Standard Financial, a Wall Street financial services firm.
The 1929 crash that caused the Great Depression happened in October. So did the 1987 crash. Stocks also suffered a short drop of nearly 10% in October 1997 in a selling panic sparked by a currency crisis in emerging markets.
Chris Retzler, manager of the Needham Small Cap Growth fund, says despite its “frightful reputation,” he does “not expect a negative October surprise.”
Stocks will benefit from improving global growth prospects and “potential clarity” on government policies, including President Trump’s recently proposed tax cut plan, Retzler says.