At times of financial crisis there is often a feeling that all the old certainties have been blown away. But what is striking about the entire history of stock-market crises is that they fall into a pattern — and this pattern makes it possible to make broad predictions about the panic cycles that have been remarkably consistent for more than a century.
American experts have dominated the sub-genre of identifying panic cycles, notably the market historian Charles Kindleberger and the economist Hyman Minsky. Based on their work, it is possible to identify the stages of the cycle — but not, to pre-empt the obvious question, to know exactly when it will end. So, here’s a 12-point guide.
Stage 1: all cycles can be said to begin with buoyant equity markets fuelled by a major development which stimulates at least one sector of the economy.
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