The market – and the public – were overconfident.
Some experts argue that at the time of the crash, stocks were wildly overpriced and that a collapse was imminent.That same sense of reckless overconfidence extended to average consumers and small investors, too, leading to an “asset bubble.” The crash happened after a long period of rising market growth that led to consumer overconfidence.
In fact, after 1922, the stock market had increased by nearly 20 percent each year until 1929.
People bought stocks with easy credit.
During the 1920s, there was a rapid growth in bank credit and easily acquired loans. People encouraged by the market’s stability were unafraid of debt.The concept of “buying on margin” allowed ordinary people with little financial acumen to borrow money from their stockbroker and put down as little as 10 percent of the share value.
A similar type of overconfidence was seen in industries such as manufacturing and agriculture: overproduction led to a glut of items including farm crops, steel, durable goods and iron. This meant companies had to purge their supplies at a loss, and share prices suffered.
www.history.com/news/what-caused-the-stock-market-crash-of-1929
vis 2019:
global equity futures soar on trade optimism, for the 100th time pic.twitter.com/jMn66W0iKH
— Alastair Williamson (@StockBoardAsset) November 7, 2019
transports +15% in 199 trading hours pic.twitter.com/prLw9WFkXb
— Alastair Williamson (@StockBoardAsset) November 7, 2019
and how did we get here? pic.twitter.com/AITT3wxFvw
— Alastair Williamson (@StockBoardAsset) November 7, 2019
China: Markets at risk of getting too optimistic about the trade deal – Deutsche Bank
“In addition, based on a simple relationship with weighted average tariffs imposed on imports from China, and the move in USD/CNH; the market is effectively pricing in not just a suspension in tariffs at current levels (7.08 as of writing), but in fact part/ complete reversal of the last round of tariffs (15%) imposed on around $110bn of goods at the start of this month.”
Is the market too optimistic on US-China trade talks?
finance.yahoo.com/video/market-too-optimistic-us-china-192120850.html
AC