What is “Black Monday”…”Crash of 87”?
Twenty years ago, on October 19th, 1987, the Dow lost 22.6% in one day or 508 points, based on the Dow’s level at that time. This day is known as the “Black Monday” or “Crash of 87”. The term Black Monday is also applied to the Dow’s drop on Monday, October 28, 1929, which started the stock market crash of 1929.
October 19th, 1987 was the worst one-day point drop ever for the Dow at the time and remains the second largest percentage point drop in the entire history of the Dow. At today’s levels, this percentage drop will be equivalent to a 3,200 points loss in one day!
Many experts believe that the 1987 crash was caused by many things. For example, computer trading systems were not mature enough to handle the massive selling by the investors. Overpriced stock market and uncertain economic conditions added to the nervousness of investors. No one knew what was going on in the stock market which made more people nervous and panic selling continued. It is interesting to note that within two days, by October 21, 1987, the Dow had regained about 290 points. In fact, October 21, 1987, is the single largest one-day percentage increase (10.15%) since 1933.
Since Black Monday, many changes have been made to improve the stock trading computers and the process. Can it still happen? Possibly.
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