Is the Stock Market crashing?

The FTSE 100, Dow Jones and other indices are falling

We could be at the beginning of a new stock market crash. In recent days and weeks we have seen indices around the world start to slide. The FTSE 100 hit 6,904 on 4 September, but stood at 6,211 t close on 15 October, a drop of 10% in only 6 weeks.

The Dow Jones peaked at 17,350 during trading on 19 September. but closed at 16,141 on 15 October, 7% down. It fell down to 15,855 during the day on 15 October, bouncing back slightly and closing at 16,141, 7% down on the September peak.

What is going on?

FTSE 100 2 Month ChartDow Jones 2 Month Chart
FTSE 100 index chart Dow Jones index chart

 

First of all, the world is not coming to an end. This is not the apocalypse and it's almost certainly not even a repeat of 2008. Keep your head about you and you can get through any impending crash and even come out of it in profit.

Moments like this are opportunities, whether the market is falling or rising. Plan your strategy carefully and you can get into some excellent stocks at discount prices and ride them up on the other side.

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What is causing the stock market to fall?

The general consensus, which is arguably more important than any charts or fundamental analysis seems to be bearish this October.

One big reason is that the last big round of Quantitative Easing is coming to an end.

Quantitative Easing helped increase the flow of money supply into the equities markets by providing large financial institutions with capital in an effort to promote lending and liquidity, thus increasing a confidence level within the financial markets. Quantitative easing is generally applied when short-term interest rates are at or fast approaching zero.

Have a read of this article - Quantitative Easing: Coming to an end? - to get up to date with what is happening. It explains why Quantitative Easing was necessary and how we know that QE is coming to an end. The article also gives some thoughts on what comes next. What will happen in a post-QE world?

Four things to do in a stock market crash

There are four things you should consider when the market starts to fall.

  1. Sell everything if you think it is starting to crash but don’t hurry.
  1. Don’t sell anything once it has crashed.
  1. Short puffed up companies.
  1. Buy back in after the crash.

 

For more info on this have a read of the full article, Four things to do in a stock market crash or subscribe to the newsletter written by ADVFN's CEO, Clem Chambers and read his latest article We're in for a bumpy ride.

Join ADVFN today completely free and stay up to date with the markets

A history of stock market crashes

Stock market bubble burstingThe general trend for the stock market over the last few decades has always been upwards, but every so often you get dips, bumps along the road. What we are experiencing now is one such bump.

It helps at moments like this to look at crashes in the past, to see their causes and try to learn from the mistakes made by our predeccessors.

Stock Market Bubbles - A Brief History explains what happened during various crashes in the past, including Tulip Mania, the South Sea Bubble, the Wall Street Crash of 1929 and the Dot Com Bubble.

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