The equity market appears to have passed the anniversary of 'Black Monday' fairly unscathed. (The FTSE 100 index closed on Friday at another all-time high of 4,053, gaining 0.6% on the week as a whole). For those who need reminding, it was nine years ago, on October 19 1987, that shares on Wall Street began a slide that spread across the globe.
There are an increasing number of investors that believe global equity markets are in for another major correction, led by the US equity market, which is looking increasingly expensive in relation to the level of corporate earnings.
It can be argued that demographic trends are moving in favour of financial assets, buoying up equity marker levels. In the US, the baby boomers are now saving seriously for retirement, pouring money into mutual funds (the US equivalent of unit trusts). For the US market rally to collapse it would require these savers to start selling their investments. It would also require corporate earnings to decline and inflation to revive.