Is there a stock market crash in your future? CBS correspondent Alexis Christoforous says there could be.
“[T]he avalanche [Oct. 19, 1987 stock-market crash] was made worse by computer program trading, but the things that triggered it were overvalued stocks, a weak dollar, a period of extreme market volatility and a summer of worrying economic news,” Christoforous said on the October 14 broadcast. “Sound familiar? Some market strategists are warning investors now to strap in.”
There’s no doubt there is risk involved when investing in the stock market and historical data should play a role in smart investing. However, the comparisons of stock values from October 1987 to October 2007 aren’t accurate according to the October 15 Wall Street Journal.
“Stocks don't look as overpriced today as they did in 1987,” E.S. Browning wrote. “Today, the companies in the Standard & Poor's 500-stock index trade only a little above the historical average of 16 times profits for the past 12 months. In 1987, the S&P 500 was at more than 20 times profits.”
Even though there are stark differences between the economic climate in October 1987 and the economic climate in October 2007 – Christoforous told viewers to be on the watch for the “Black Monday, part II.”
“Can it happen again? It could,” Christoforous said.