US Stock Market Shows Increasing Similarities to the 1907 Financial Crisis
As the US stock market reaches new highs, voices recalling the 1907 financial crisis are emerging from Wall Street. This is due to a surge in funds borrowed for investment and short-term trading, surpassing the rise in stock prices. Jason Zweig, an economics columnist for The Wall Street Journal, argues that the current speculative frenzy resembles 1901 more than the 1999 dot-com bubble. Both 1901 and the present have seen strong bull markets accompanied by a proliferation of short-term trading and leveraged investments. In 1901, the turnover rate of stocks on the New York Stock Exchange reached 319%, and 'bucket shops' were rampant among small investors at the time. According to the Chicago Board Options Exchange, the proportion of zero-day options expiring on the same day among S&P 500 options hit a record high of 66.2% in July. Margin debt in the US stock market has risen to $1.42 trillion, an increase of about 39% from a year ago. The S&P 500 index has risen by 12.65% this year. Zweig warned that the speculative frenzy might not lead to a market collapse and that the bull market could extend further. He pointed out that if the speculative frenzy accumulates, it could amplify liquidity shocks.
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