What do the following dates have in common?
October 27, 1997
March 16, 2020
December 1, 2008
October 19, 1987
March 12, 2020
These are the 5 single worst days in stock market history since the great depression.
On October 19, 1987, often referred to as Black Monday, the Dow Jones Industrial Average dropped by an unprecedented 22.6% in one day, marking it the largest one-day percentage decline in its history. Other global markets experienced similar collapses, triggering a widespread financial panic. To put this drop in perspective, that would be similar to a 10,000+ point drop in the market today.
What caused the 1987 crash
Several factors contributed to the crash, including growing concerns about rising interest rates, economic uncertainty, and the overvaluation of stocks. One significant factor was the rise of computerized trading and portfolio insurance strategies that automated sell orders once prices started falling, exacerbating the market’s decline.
Some news goods about the ’87 crash
The crash led to reforms in market regulation, such as circuit breakers, which pause trading during extreme volatility, to prevent a similar collapse. Despite its severity, the 1987 crash didn’t trigger a prolonged economic recession but served as a reminder of the dangers of market speculation (the market ended up positive for 1987) and automated trading systems. Sounds familiar.
What would you do if there was a 10,000+ point drop in the stock market, do you have a plan in place should something similar happen today?
Do you know how your investments would fare? Do you know what you own, and why?
The best time to make changes is well before the possibility becomes a reality, when you are not under mental anguish.
While I’m not predicting another 1987, you shouldn’t completely rule it out either. History has shown the market can drop hard and fast.
What should your next 3 moves be? Plan. Prepare. Execute.
-Paul R. Rossi, CFA