Under Trump's vision of tax reform, the three major US stock indexes have reached new highs again, according to a comprehensive report by Hong Kong's Wande News Agency. It has been more than eight years since the bull market began in March 2009. It is getting closer and closer to the longest bull market in US stocks from 1987 to 2000. Today coincides with the 30th anniversary of the 1987 crash, and there is renewed talk about whether U. S. stocks have peaked.

Thirty years ago today, it was the worst day in the history of the American stock market. On the same day, the Dow fell 22.6% and the S & P 500 fell 20.47%, wiping out the gains of the past year or so in one day. At that time, the market atmosphere was like October 29, 1929, as if it were about to trigger a second Great Depression. Of course, this did not happen, and the next recession began in July 1990, nearly three years later, which is why the 1987 crash was seen as a flash in the pan.

MarketWatch quoted Henriques, a veteran writer of the New York Times and original author of the hit movie "fraudulent hand," as saying that Oct. 19, 1987 was "Black Monday," not a temporary crash, but a bear market that lasted for three months, during which the Dow fell nearly 1000 points or 35%. It was also a near-systemic crisis and a harbinger of many subsequent crises, such as the financial crisis of 2008.

She said the 1987 crash was caused by several basic factors: dangerous automation, virtually little knowledge of financial products boosted by large amounts of borrowed money, fragmented regulation and a large investor base. When the crash comes, new technology and program trading can not hedge risk, but become a tool to accelerate the sell-off of stocks and options. When market risks spread, there was nothing the Securities and Exchange Commission (SEC) and the Commodity Futures Commission (CFTC) could do.

If the US stock market collapses, it will be even more terrible than in 1987.

The market has not changed much fundamentally since the crash in 1987, and in some ways it has become even worse. Analysts believe that whenever the next crash comes, it is likely to be more serious than the one in 1987, for the following reasons:

1. The market is more dispersed. Back in 1987, the New York Stock Exchange and the Chicago Stock Exchange were almost the only options for investors, but now there are 12 regulated stock exchanges and 30 alternative trading systems, and no one knows how many dark pool trades (Dark Pool). The NYSE now accounts for only 30 per cent of trading, up from 90 per cent in 1987.

2. Supervision stands still. Henriques complains that the 2008 financial crisis also failed to make regulators change much. Despite the rapid development of financial innovation, the regulation of SEC and CFTC has failed to keep pace with the times. Dode-Frank laid down strict rules, but Henriques believes that flexibility is also necessary for regulation. "We have moved away from the realistic approach to market regulation and I don't know where you will start," she said. "

3. Computer trading is more common than ever. Program trading became the scapegoat for the 1987 crash, especially portfolio investments (comprehensive put options for the entire stock portfolio) and index arbitrage (buying S & P 500 futures and selling all stocks at the same time). But when panic struck, these strategies collapsed as buyers disappeared, pushing exchanges and clearing houses to the brink.

JPMorgan Chase & Co estimates that passive and quantitative investment accounts for 60 per cent of stock trading, double that of a decade ago. Large investors use trillions of dollars-driven algorithmic trading, such as Pioneer and Blackrock, with assets under management of $10 trillion each, mostly passively, with software programs guiding stock purchases.

If you can't imagine the risk of algorithmic trading getting out of control, you can see a thing or two in the "flash crash" of US stocks on May 6, 2010, when the Dow tumbled 1000 points before narrowing to more than 300 points. So far, no one knows why it happened.

Henriques speculates that the next market crash will spread panic more quickly and on a larger scale than in 1987, which will further exacerbate the sell-off.

With price volatility already near record lows in recent weeks, traders last week pushed short bets on the CBOE volatility index (VIX) back to record highs, the fourth time that VIX bets have hit an all-time high in just 11 weeks. Alain Bokobza, head of global asset allocation at Soci é t é G é n é rale, warned that investors were dancing on the edge of the volcano.

Although US stocks have trampled on various bearish voices with practical action, it is worth cautioning that all valuation indicators have shown that US stocks are already very expensive. Among them, Schiller PE, Hersman PE and price-to-earnings ratio to growth ratio (PEG Ratio) have climbed to the skyline.

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