The Market Crash of 1987 – Black Monday 30 Years LaterSubmitted by Orange CA Financial Advisor | Sterling Wealth Partners on October 3rd, 2017
Thirty years ago, this month, the stock market experienced the largest one day drop ever – 508 points or 22.6% for the Dow Jones Industrial Index. Market declines all around the world were even larger, with the Hong Kong exchange dropping 45% in a single day.
October 19th, 1987 or “Black Monday” as it was called still has the dubious distinction of being the largest one day drop of all time, even thirty years and two major market corrections later. As a new advisor, just one year into the business, I can still recall the impact this had on investors and the financial industry as $500 billion was lost in a 24-hour period. Black Monday was indeed a very big deal. The good news, was that this bear market was short lived (only 2 years until the market fully recovered) and ended up being just a blip on the continued market run up until the tech stock bubble burst in 2000.
So, could another Black Monday happen now? The answer of course is yes. While the large one-day drop was largely caused by computer “program” trading, there were still other underlying reasons for the correction like an overvalued market, recently passed tax legislation and an increasingly large Federal budget deficit. There had also been a fairly extended 5-year bull market that started in the summer of 1982. Changes to computer trading which include “circuit breakers” were implemented to minimize dramatic drops like this caused by computer programs, but the other economic issues are eerily like what markets still face today.
No one can predict the future and what markets will do. In fact, many of the economic indicators we evaluate when designing portfolios are currently positive. However, this bull market is over 8 years old and it would be smart to expect a correction sometime in the future. For those of you in the 10 year “Retirement Red Zone”, avoiding a large market correction like 1987, 2000-2002 or 2007-2008 is critical to the long-term success of your retirement income plan. We can help by evaluating your risk score and providing an independent, objective portfolio analysis.
If you would like a complementary portfolio analysis, please contact us to schedule an appointment.