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"The Stock Market Is Crashing: 1,000 Point Wipeout
Marks The Beginning Of A Major Financial Nightmare"
by Epic Economist
"The U.S. Stock Market Crash is accelerating at a breathtaking speed – and a 1,000-point flash wipeout indicates that the beginning of a historic financial nightmare is already here. Is this “the Big One”? Wall Street is asking. Last week, the stock market has faced extensive losses, and investors are worried about what will happen when markets open this week, as fears of a massive drag down in the S&P 500 continue to rise.
On Wednesday, the Federal Reserve might have started to realize that it made a colossal policy mistake over the past decade. As its benchmark interest rate rose by 50 basis points to help fight soaring inflation, Wall Street investors went into full panic mode. The largest single-day stock market crash ever recorded occurred on Thursday, at a time when stock prices had already fallen quite dramatically. On Thursday, all the major indexes faced a brutal shock.
Days before the flash crash, stocks were melting up – an expression used to describe the moment when indexes are trending lower but some bubble stocks are still being propped higher as speculators anticipate further losses. On Wednesday, all the indexes recorded strong gains - only to lose all of them and some more over the next trading session. “If you go up 3% and then you give up half a percent the next day, that’s pretty normal stuff. But having the kind of day we had [on Wednesday], and then seeing it 100% reversed within half a day is just truly extraordinary,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.
The trigger that prompted investors to rush for the exits was the simple realization that the Fed will not back down from its tightening plan. Worse, they're noticing that corporate CEOs don’t know what to do to hide the slower pace of growth and flatlining earnings. Given the extraordinary amount of leverage in the market right now, rapid declines can set off wave after wave of forced selling. In fact, if we take a look at the latest trends, this appears to be already taking place to a certain degree. And when stocks reach this point, there’s no turning back. It will certainly not take a lot of effort for this “market slide” to evolve into a “market avalanche”.
According to Bank of America’s chief investment strategist, Michael Hartnett, we’re at the beginning of a bear market that will extend well into October, with the S&P at 3,000. The expert compiled some useful information. Over the past 140 years, we witnessed 9 bear markets, with average price declines of 37.3%. The average duration of those declines was of 289 days. Even though past performance is not always a guide to future performance, “if it were, today's bear market would extend until October 19th, with the S&P 500 at 3,000, Nasdaq at 10,000,” he wrote.
His gloomy predictions don’t stop right there. The strategist argues that the carnage is going to pick up speed as inflation hits 10% and growth nears zero. For a long time, stock prices were able to defy economic reality. Many of these bubbles certainly defied gravity. But now they’re deflating, and as economic conditions rapidly deteriorate all around us, the party seems to be almost over. Trillions of dollars are gone, but Wall Street is still failing to realize that what we have been through so far is just a warm-up act. The clock is ticking, and what happened on Thursday should be a major wake-up call for all of us to prepare for what’s coming next."
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