Chart of the Week: "This time its different"

By Colin Twiggs
March 21, 2020 4:00 a.m. EDT (7:00 p.m. AEDT)

First, please read the Disclaimer.

No warning. No volatility working its way higher as market fears build. Just a sudden and abrupt crash.

S&P 500

It's more reminiscent of October 1987, when the Dow fell 22.6% in a single session, than the most recent two stock market crashes (2000 & 2008).

Dow Jones Industrial Average, October 1987

In 1987 the Dow from a high of 2750 before finding support at 1750. A fall of 36%. But this time is different.

The '87 crash was largely attributable to over-priced stocks and rising corporate debt levels. We have both of them again in 2020, but in spades.

Corporate debt at more than 30% of GDP, dwarfs the 1987 peak of 19.5%.

Nonfinancial Corporate Debt

And Price-Earnings of 23.12 at the end of 2019 is way above the 18.69 from 1987.

S&P 500 PEmax

So the reaction could be far more severe.

But there is a third factor that is far more important: COVID-19 or the China-Virus as the Secretary of State likes to call it.


Bungling attempts to bring the outbreak under control are likely to have a far greater impact on the country and the economy.

This time it's different. We still have a long way to go.

Fox News Farce

Fox News

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Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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