The article discusses the historical weakness of stocks in September and October and delves into the reasons behind this trend. The interview with Mark Higgins, a senior vice president at Index Fund Advisors, sheds light on the historical context of financial panics in these months dating back to the 1800s. It also explores the impact of the agricultural financing cycle on the financial system’s stability during the late summer and early autumn months. Additionally, the article touches on the role of the Federal Reserve Act of 1913 in providing stability to the markets and the lingering effects of the historical patterns on contemporary market behavior.
Highlights of the article:
1. Historical Weakness of Stocks in September and October: The article traces back the historical trend of intense panics on Wall Street during these months, citing examples from the 1800s such as Black Friday of 1869 and the Panic of 1907.
2. Impact of Agricultural Financing Cycle: The inelasticity of the U.S. currency and the capital movements related to agricultural production during the 1800s are discussed as factors contributing to the vulnerability of the financial system in the late summer and early autumn.
3. Role of the Federal Reserve: The article highlights the significance of the Federal Reserve Act of 1913 in granting the Fed the power to intervene as a lender of last resort during financial crises, ultimately providing more stability to the markets.
Summary:
The article explores the historical reasons behind the weakness of stocks in September and October, linking it to the agricultural financing cycle and the limitations of the U.S. financial system prior to the establishment of the Federal Reserve. It also reflects on the impact of these historical patterns on contemporary market behavior and the role of the Federal Reserve in enhancing market stability.
Editorial content by Harper Eastwood
