The heavy indebtedness that became a crisis around 1980 was due, not so much to the failure of the system as to the rapid increase in the cost of oil and
the abrupt rise in interest rates.
The rather
abrupt rise in interest rates this year has probably also played a part, and is certainly responsible for some of the increase in the stock market's volatility.
An abrupt rise in interest rates, concerns about rising inflation, and a potentially more hawkish Federal Reserve have created an equity market tantrum that now has the Dow and S&P 500 Index in full correction territory (a correction is a price decline of between 10 % and 20 %).
Not exact matches
Looking forward, these sorts of
abrupt swings
in financial markets are likely to continue, amid sluggish economic growth,
rising interest rates, high valuations and geopolitical uncertainties.
Indeed, the Chinese central bank had to launch an intervention of its own to combat the
rise in price of money; Bloomberg reported that the People's Bank of China injected $ 8.2 billion into that nation's financial system to combat an
abrupt increase
in interest rates.
Equally important, even during extended speculative periods as we observed
in the late - 1990's, those advances have tended to suffer deep and
abrupt intermediate - term corrections once elevated valuations are joined by overbought conditions, overbullish sentiment, and
rising interest rates, as we observe today.
The «canonical» market peak typically features rich valuations,
rising interest rates, often a reasonably extended and «flattish» period where, despite marginal new highs, momentum has gradually faded while internal divergences have widened, and finally, an
abrupt reversal
in leadership, from a preponderance of new highs over new lows (both generally large
in number) to a preponderance of new lows over new highs, with the reversal often occurring over a period of just a week or two.
Looking forward, these sorts of
abrupt swings
in financial markets are likely to continue, amid sluggish economic growth,
rising interest rates, high valuations and geopolitical uncertainties.