S&P 500 Rally: Historical Parallels, Uncertain Outcomes

This geopolitical crisis has triggered an influx of journalistic reports and social media content, causing the need to navigate through a barrage of information to access any other topics, be it social or financial. Surprisingly, even LinkedIn, a professional networking platform, has seen professionals sharing their opinions on this matter, veering away from its usual corporate focus.

As is often the case, geopolitical events of such significance have a ripple effect on financial markets. Last week, when European and American markets opened for the first time since the war’s outbreak, the NYSE, NASDAQ, and the US dollar experienced significant value gains. This was primarily due to the presence of military companies with stocks listed on American exchanges, instilling investor confidence amid current and potential future demand.

By Thursday at 12:30 PM New York time, the S&P 500 index had climbed to 4,384 following a rally that began on Monday. Yet, by the close of Friday’s US trading session, it had declined to 4,327 points.

Some research institutions have drawn parallels between the current stock market and the events of 1987. Common factors such as a third-quarter correction and a weakening market breadth are being observed between today’s S&P 500 and that of 36 years ago.

While these similarities may appear concerning, it’s crucial to note that a sudden decline akin to the “Black Monday” crash of October 19, 1987, where the Dow Jones Industrial Average plummeted by 22.6% in a single day, is not anticipated this time around. Circuit breakers, implemented after the 1987 crash, make a 20% drop almost unfeasible by halting trading at 7%, 13%, and 20% drops.

Moreover, the magnitude of the S&P 500’s peak gain this year differs significantly from that of 1987. Additionally, the broader economic landscape today deviates from that of 1987, with variances particularly noticeable in macroeconomic data.

While 2023 has seen economic data outperforming expectations, the acceleration of economic activity has been relatively subdued compared to the rapid expansion witnessed in 1987. This underscores the point that history may rhyme, but it doesn’t necessarily repeat itself. Despite the shared characteristics between the current scenario and 1987, it does not portend an imminent market crash akin to that of 1987.

However, the present day is characterised by heightened geopolitical tensions and an electronic trading environment where sudden trends emerge in assets closely linked to current affairs. These elements introduce unique variables and uncertainties into today’s financial landscape.

FXOpen offers spreads from 0.0 pips and commissions from $1.50 per lot. Enjoy trading on MT4, MT5, TickTrader or TradingView trading platforms!


This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

The post S&P 500 Rally: Historical Parallels, Uncertain Outcomes appeared first on FinanceFeeds.