(Oct 23): In the week of Oct 16, attention was focused on the potential for markets to fall and the rise of China’s President Xi Jinping. They are both connected by a common thread — China’s increasing prosperity, particularly its acceleration under Xi.

Of particular importance is the outward flow of Chinese capital into markets as diverse as the US bond and equity markets and the property markets of Australia and Vancouver. Also important is the developing potential for the diversion of Western investment flows into China both as a consequence of the expansion of Belt and Road Initiative (BRI) projects and the inclusion of China in the MSCI indices.

The 1987 stock market crash was very unusual in that there were no end-of-uptrend patterns in the market. There were several infamous market calls. The inconsistency of market calls using these methods post-1987 suggests that their 1987 success was coincidence and not correlation. Call a crash long enough — as with the last three years of Dow Jones performance — and eventually a crash will happen. Like a game of musical chairs, it is the last one to call the crash who looks like they know what they are talking about.

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