‘God help us all’: Chart sparks fears of new GFC

Global markets could be headed for their biggest crash since the GFC, according to some concerned analysts.

Several charts, they say, are showing similarities between today’s market conditions and those of 2008.

“God help us all,” wrote one online commentator, who compared recent movements of the Dow Jones Industrial Average to those that preceded the GFC’s darkest days.

Chart showing GFC comparison.
A comparison of the Dow Jones Industrial average in 2022 (left) and 2008 (right).

The ‘experts’ are worried

Fuelling concerns are the results of a recent survey of Global Fund Managers, which showed their allocations to global stocks are at their lowest levels since 2008.

Macro analyst Jim Bianco says the last time that survey had a similar underweight was in October 2008 – and after that equities fell another 40% to their March 2009 low.

However, Bianco has also pointed out the underweight in equities varies greatly depending on geography.

“These managers are essentially neutral on US equities and extremely underweight European equities,” he said.

New GFC?
Source: BofA Global Fund Manager Survey.

Hedging at record levels

Research group SentimenTrader says it’s found a chart that “blows your hair back”.

The data shows that institutional traders bought $8.1 billion worth of put options last week, which is 300 per cent more extreme than in 2008.

The purchase of a put option gives the holder the right to sell an asset at a specified date and is generally interpreted as a negative sentiment about the future value of the underlying stock.

“In 22 years of doing this, (no chart) stands out like this one,” the company tweeted.

Chart showing a sudden increase in put options.
Chart showing a sudden increase in put options. (Source: SentimenTrader)

Risk appetite lowest since 2008

The Fund Manager Survey referred to earlier also has risk appetite at a level not seen since 2008.

However, hedge fund consultant Seth Golden points out that this is not necessarily a sign that things will get worse from here.

He has pointed outed out that most times risk appetites reach extremes, markets surge:

Chart showing Investor Risk Appetite lowest since GFC.
A chart showing the risk appetite of fund managers. (Source: BofA Global Fund Manager Survey).

What happens now?

Many astute observers say making comparisons to 2008 is a futile exercise, and don’t expect the market to crash to GFC levels.

But that’s not to say there’s not more pain ahead.

Well-known Australian finance writer Scott Pape, for example, says a market crash is entirely possible.

“We are well overdue for a stock market crash,” Pape said.

“They happen, after all, on average every 10 years, and the last one was 14 years ago.”

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