Stock market crashes have come and gone in America, but Monday (October 19) marks the 28th anniversary of Black Monday. The crash on October 19, 1987 was worse than the 1929 stock market crash and wiped out $500 billion in earnings in one day.
The crash is highlighted in all its glory in this re-published article from the New York Daily News, published October 20, 1987 – the day after the crash.
“The stock market collapsed yesterday, buried under a selling avalanche of more than half a billion shares, as panicked traders recalled the Great Crash of 1929.”
“‘This has got to be financial panic, worldwide. There can be no question that history is in the making,’ commented First Albany Corp.’s chief investment strategist, Hugh A. Johnson.”
“The market free-fall easily eclipsed the crash of Black Tuesday, 1929. The Dow Jones Industrial Average plummeted 508 points, more than four times the ‘old’ record of 108.35 set Friday. The blue-chip stocks that make up the Dow lost 22.62% of their value, easily topping the 12.82% decline of Oct. 28, 1929.”
While optimists may look back on stock market crashes like those in 1929, 1987, and 2008 and proclaim it could never happen again, the United States has come awfully close to a complete meltdown of our stock market as recently as this year.
A look back at August 24 gives us a glimpse of how the U.S. still teeters on the edge at times, with calamity in the stock market. On that date, the Dow Jones Industrials briefly flirted with a 1,000-point loss in early trading. While it recovered later that morning, the total trading day saw a worse drop than 1987’s stock market crash.
The Wall Street Journal reported the Dow closed down 588 points on August 24, bringing the Dow to an 18-month low based on “growth fears” that led to a worldwide selloff of stocks.
“The Dow’s tumble marked its largest one-day point decline ever on an intraday basis, as intensifying growth fears sparked steep stock-market losses world-wide,” the financial newspaper of note reported at the time. “Large retail brokerages hosted calls with their legions of financial advisers, encouraging them to stay calm and possibly buy beaten down companies. Mutual funds and hedge funds also began scooping up stocks, traders said.”
With this year already producing the largest one-day swing in Dow Jones history, should American investors prepare themselves for more? History says maybe.
According to ETF Daily News, nine of America’s 16 worse stock market crashes have occurred in the month of October. The website said a stock market crash is, of course, not guaranteed. But based on September stock market performance, a crash is not out of the question.
“Clearly, there is a tremendous amount of momentum toward the downside right now,” the website reported, adding that “all of the gains for the Dow since the end of the 2013 calendar year have already been wiped out.” ETF Daily News went on to note “the loss of 11 trillion dollars in ‘paper wealth’ on stock markets all over the planet” last quarter.
CNBC contributor Michael K. Farr holds a different opinion from ETF Daily News, noting four reasons he believes a stock market crash is unlikely at this time.
The first reason, Farr said, is “Asset prices, though inflated, are not really in bubble territory.” Even though the Dow has been at its highest levels this year, in spite of a mediocre economy, Farr insists there is no bubble. Remember that should a crash happen in the near future.
The other reasons he believes a crash is not on the horizon? The economy is growing, even slowly, and that indicates a recession is unlikely. The third reason is the heavy regulations of banks under the Dodd-Frank Act and the capitalization banks must maintain under the law. The last reason Farr believes we are not heading to a stock market crash? Consumer debt is lower than 2008 and other debt has been refinanced at record low rates.
What do you think? Do you a free with ETF Daily News and are you expecting a stock market crash before month’s end? Or do you agree with CNBC‘s Farr that a crash is not on the horizon? Join the conversation below.
[Featured image via Spencer Platt/Getty Images]