So says Dr. Judy L. Klein, professor of economics at Mary Baldwin College in Staunton, VA and historian of economic statistics. She is the author of Statistical Visions in Time: A History of Time Series Analysis, 1662-1938 (Cambridge University Press).
"There were financial crises or market crashes in the United States or Britain in the autumns of 1839, 1847, 1857, 1873, 1878, 1890, 1899, 1907, 1929, 1930 and 1932," she points out. "Within the annual rhythms of accumulation and dispersion in the early 20th century, autumn was the time for high rates of interest and margin calls."
Fall was the season for money to flow from New York banks to the grain movers in the Midwest or foreign exchanges abroad. During the rest of the year money would gradually flow back into the city.
"But the autumn scene was a settlement of cash," Dr. Klein says. "Without additional leveraged liquidity to maintain surface tension, speculative bubbles burst in late September or October."
Economists have supposed, however, that conditions have changed to eliminate seasonal financial problems. The Federal Reserve was formed in 1913, in part, to "provide a currency that was elastic enough to withstand the financial drain." World War I ended the first wave of globalization of markets and stopped the autumnal drain of capital from New York to the rest of the world. Laws passed after the market crash of 1929 broke links between the banking system and the stock market. And the practice of autumn "settlement days," when landlords collected rents and other debts were paid—in place since the Middle Ages—declined around the world.
Not so fast. "We may be less seasonally adjusted now than we assume," observes Dr. Klein.
Even after the establishment of the Federal Reserve Bank there were financial panics or stock market crashes in the autumns of 1929, 1930, 1932, 1987 and 2008.
"With a second wave of globalization, New York is once again a financial center to a less-developed periphery. There is an increasing link between American security markets and foreign exchange markets, and there is new exposure to seasonal cycles and even settlement days in other economies. Likewise, some short-term interest rates and spreads still exhibit a remarkable fourth-quarter variation."
In addition to these seasonal factors, Dr. Klein notes that "we have courted conditions for increased volatility and negative spin offs from that volatility."
These include rising inequality in domestic and international income distribution which has increased the demand for high-yielding financial assets. And years of deregulation have increased the "creative complexity and opaqueness of financial instruments."
"Also we have recently eliminated some of the Depression-inspired regulations, such as those embodied in the Glass-Steagall Act that had separated credit markets from stock markets."
Dr. Klein's conclusion: "Market volatility can still strike up a harmonic resonance with the equinoctial gales and keen winds of autumn."
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