Stock markets posted their worst September in more than a decade. Although September has been the scene of significant dates where global financial markets have suffered significant losses, such as the September 15, 2008 bankruptcy of Lehman Bruce, October tells him: “Go away, I’m going here.” The panic of 1907 – in which John Pierpont Morgan rallied America’s most powerful traders and saved the financial system (the Fed did not yet exist) – as well as the stock market’s black Monday, Tuesday and Thursday in 1929, which began Marked the Great Depression, it happened in October. As if that wasn’t enough, ‘Great. Crack 1987 – Also in October. In this regard, many market participants are psychologically convinced that there is an ‘October effect’, despite the fact that there is no statistical evidence to confirm that equity markets have suffered this month.
Despite the above, we are here a few days after the start of the month and the stock markets have suffered a series of declines, the dollar has strengthened and the volatility in general has increased significantly. One of the most widely used indicators by market participants is the VIX – which reflects the volatility of the S&P 500 stock index, which has risen 30% since mid-September. Could this be the ‘curse of October’? Personally, I don’t believe in these phenomena beyond the fact that in a few moments they become self-fulfilling prophecies. In spite of the above, I consider that the beginning of the last quarter of the year indicates some problems of self-assessment of companies and investment funds and even at the personal level, which in some years Can destabilize financial markets, that is, I think it does not happen every October, but only in a few years.
In that sense, there is no doubt that this year has been extraordinary, as it was last. Outbreak of 2020 with a major recession and 2021, the year of recovery. Earlier this year, there was little sign of how fast the recovery could go. Although most countries implemented extraordinary financial and financial stimulus in 2020, various forms of Covid 19 continued to grow with increasingly contagious disease and vaccine administration had just begun, developed in record time, with a very long trial period. ۔ With great inequality around the possibility of their application. However, the reopening of the economy, especially the activities that were most affected, went far beyond the estimates of institutions, governments, companies and individuals.
This led to global growth, but as a result, there was a shock to demand, which was not ready to meet supply. Thus, poor planning which led to the epidemic itself, as well as changes in consumption habits and disruption in the supply chain created a vicious circle from which we could not escape and the most obvious result of which was a significant rise in inflation. Is worldwide. The reaction of the central banks, whether only at the level of conversion or monetary policy stance, has not stopped. Another consequence of supply chain disruptions is the temporary slowdown in economic activity.
On the other hand, the significant changes we have seen in such a short period of time have created problems for companies whose balance sheets cannot be changed by the same dynamics of change itself, which creates imbalances, such as Evergrand Real. The issue of the state is China, the severity of which could become a military threat. As if that weren’t enough, geopolitical risks never diminish, like the pointless debate over the ‘debt limit’ in the United States. The bad thing is that these days all these phenomena are happening at the same time.
do not have. Halloween Among the markets, the effects of the economic reopening are fading, there are barriers that stimulate growth and accelerate inflation, leading to less global financial easing, geographically. Political conflicts that promote vicious circles and create imbalances in companies and governments can lead to other problems. We are in a very difficult global environment. It is important that those who design and implement economic policy take it into account, so that at least they do not contribute to more challenges. Despite the above, I do not see it as the beginning of another crisis, but as a ‘stop on the road’, on the path to global development.
The author is the chief economist for Latin America at Barclays Bank, chairman of the IMF’s National Committee for Economic Studies, and a member of the Mexican Economy’s Dating Cycles Committee.
The views expressed in this column are personal.