Stock Market Crash Like in 1987 to Happen Again in 2012
The stock market may plunge in the second half of the year like the “1987 Stock Market Crash” if the Standard & Poor’s 500 Index climbs without further stimulus from the Federal Reserve, said Marc Faber, the publisher of the Gloom, Boom & Doom report.
The market will have difficulties to move up strongly unless we have a massive QE3 — referring to a third round of large-scale asset purchases by the Federal Reserve. If the S&P 500 moves and makes a high above 1,422, the second half of the year could witness a crash like in 1987.
The Dow Jones Industrial Average plunged 23 percent on October 19, 1987 in the biggest stock market crash since 1914, triggering sharp losses in stock-market values around the world. The Standard & Poor’s 500 Index plummeted 20 percent.
If the market makes a new high, it will be a new high with very few stocks pushing up and the majority of stocks having already rolled over — the earnings outlook is not particularly good because most economies in the world are slowing down.
A third round of quantitative easing would “definitely occur” if the S&P 500 dropped another 100 to 150 points. If it bounces back to 1,400, the Fed will probably wait to see how the economy develops.
Marc Faber said that it was “very difficult to see a scenario where you wouldn’t make any money” owning stocks over the following 10 years, while also warning the S&P 500 might lose 26 percent before the bear market ended.
The benchmark gauge for American equities began its biggest advance in five decades that day, climbing from 676.53 to 1,295.02 on January 18, 2011.