Buckle up because global markets are in for a bumpy ride in the days

Financial market gains, they reckon, are built upon a wall of worry.

While there has been much to celebrate in the past year, with the sharp burst out of global recession fuelled by rapidly developed vaccines, the optimism suddenly seems to be evaporating.

Investors have slammed the brakes on the incredible surge on global stock markets that began in March last year.

Australia has been among the hardest hit, as crashing iron-ore prices have exacted a heavy toll on our biggest miners.

Problems, however, are emerging on a number of fronts. And it’s not just the toll the Delta variant is exacting on growth.

In no real order, they are as follows: the disruption to global trade from shipping constraints; a rapidly emerging energy crisis; serious concerns about China’s property market and its entire growth model; and an escalating dispute within the US Congress that threatens to destabilise the global economy.

Oh, yeah … did we also mention hints from the world’s biggest central banks they are becoming increasingly worried about the huge amounts of money they are injecting into the economy, amid concerns it all might backfire?

For months, there have been warnings from major global investors that the nosebleed valuations on markets from New York to New Delhi could not be sustained. Everyone, from the 91-year-old legendary investor Warren Buffet down, has been concerned about an impending correction.

While markets certainly have turned bearish, their fears have so far been allayed by the sheer weight of cash pouring out of central banks and into financial markets.

That has helped superannuation funds here and around the globe deliver sterling returns to members, off the back of booming stock and property markets. But those easy gains appear to have evaporated and investment managers will find it tough to deliver the kind of returns we have just witnessed in the year ahead.

The great October crash

September is usually the worst-performing month for stocks, and this year was no exception. October, however, has the distinction of being the month that has hosted some of the greatest market collapses in modern history.

The Wall Street crash of 1929, Black Tuesday in 1987 and the Asian Financial Crisis Crash in 1997 all occurred in October. While Lehman Brothers collapsed in September 2008 — sending global markets into a tailspin — the losses accelerated through October.

Coincidence? Maybe. There is no rational argument explaining the phenomenon. But traders with any sense of history recognise the pattern and almost every year the tension builds.

While we ended September on a surge after a rocky four weeks, last Friday heralded the start of a new month and a new quarter with a thumping nosedive that helped erase four and a half months of gains.

Even though we are likely to see some…