The 10 stages cycle of a typical stock market crash
Stage One – The Euphoric Build Up This is the point of maximum financial risk as the market builds towards a peak- where Wealth Managers feel invincible. 1986 and 1987 were banner years for the stock market. These years were an extension of an extremely powerful bull market that had started in the summer of 1982. In 1987 it was five year bull run up while the 2008 crash had earlier seen run up of again just over 5 years ever since the end of the “dot com crash” which started on October 9th 2002. As can be seen below, the bull market can take various numbers of days but most have taken just over 2000 days. Stage Two – The Final Top The second stage is a crescendo in the market – this is often the peak before the market crashes and is characterized by complacency and the sentiment of the investor is a general feeling of “I can buy any stock and it will go up”. As you can see from the Chart 6.3: (Oct 2006-September 2007 Dow Jones Industrials) below it can be quite euphoric at...