The late 1980s was a great time for headbands and parachute pants. For much of the decade, it was also great for stock markets around the world.
According to the government, the 19 largest markets worldwide achieved an average return of 296% from August 1982 to August 1987. The Dow Jones Industrial Average DJIA,
exploded from 776 to 2,722 in those years, including a 44% increase in the first eight months of 1987 alone.
But on October 19, 1987, things got ugly in a hurry.
Troubling financial developments, including a growing US trade deficit, “portfolio insurance,” high stock valuations and, perhaps most importantly, the surge in computer trading hit the stock market with a toxic combination that resulted in one of the worst trading days in history. The Dow and the S&P SPX,
both lost more than 20% in a single session.
This Monday marks the 33rd anniversary of Black Monday and at least one investor on Reddit is celebrating the occasion by posting this graph of the similarities between price movements then and now.
The Reddit member behind the post, bigbear0083made it clear that he was not making a prediction but said that there are many ingredients that could potentially trigger a downturn like another coronavirus wave, bloated ratings, elections, civil unrest, massive weather events, etc.
The best answer: “Couldn’t you mention this Friday at 2:55 pm?”
Investors have already proven ready this year to pull the trigger for the sale. The Dow lost more than 11% in March – its worst trading day since that fateful day in 1987.
“The biggest problem is not the coronavirus, but the emerging liquidity crisis,” Kent Engelke, chief market strategist at Capitol Securities Management, told MarketWatch at the time. “It’s scary to be honest. That shakes your confidence in the market. “
As for Friday’s trading, stocks have taken a three-hour hiatus to end a troubled week, even if the pandemic and elections continue to create uncertainty. More than half a dozen states, including Ohio and Michigan, reported record numbers of new coronavirus cases on Thursday, bringing the number of U.S. days in a day over 60,000 for the first time in over two months.