How ripe is Wall Street?

Many transactions can be settled with credit, with postponed payments. Some cannot, and the most obvious are those concerning taxation. Taxes demand cash, a requirement that is repeated every year at about the same dates. This means there is seasonal selling on the stock market, when taxpayers are preparing their quarterly contributions. One of these dates is mid-September, which adds on to fees for school and university, and to the backlog of summer vacations. Households are in need of cash and will realise some of their invested savings. September is selling season for stocks and, at the end of the month, government closes its fiscal year and discloses its balance sheet. A sizable deficit weighs down on an already depressed market, and October is when panic selling by over-leveraged investors sets in.

Stock market crashes are autumnal events that depend on long term circumstances such as profits to earnings ratios compared to historic averages, the general level of debt and the position in the ten year business cycle, and on the volatile ambient feeling of optimism or pessimism. It seemed probable last year, but the moderate dip only occurred at the end of January. That could be due to Asia’s different festive calendar and tax deadlines, and to its share of global GDP that is approaching America’s. Tremors can come from emerging markets, but Wall Street remains the giant hub of world finance. It is only when the New York Stock Exchange crumbles that everything comes crashing down. A year on and the fruit is even riper.