The late 1980s was a good time for hair bands and parachute pants. For much of the decade, it was also good for stock markets around the world.
The 19 largest markets globally had a return of 296% from August 1982 to August 1987, according to government data. Dow Jones Industrial Average DJIA,
exploded from 776 to 2,722 in those years, including a 44% increase over the first eight months of 1987 alone.
But on October 19, 1987, it got ugly in a hurry.
The downturn in economic developments, including a growing US trade deficit, “portfolio insurance”, high stock valuations and perhaps most importantly the rise in computer trading, slammed the stock market with a toxic combination that led to one of the worst trading days. in history. Dow and 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 marks the occasion by posting this chart of the similarities between price actions then and now.
The Reddit member behind the post, bigbear0083, made it clear that he did not predict, but said there are plenty of ingredients that could potentially trigger a slowdown, such as another coronavirus wave, inflated valuations, the election, riots, massive weather events, and so on.
Top answer: “Couldn’t you have mentioned this Friday at 2:55 p.m.?”
Investors have already shown their readiness to pull the trigger this year, with the Dow throwing back more than 11% in March – the worst trading day since the fateful day back in 1987.
“The biggest problem is not the coronavirus, it’s the new liquidity crisis,” Kent Engelke, chief marketing strategist at Capitol Securities Management, told MarketWatch at the time. “It simply came to our notice then. It really shatters your confidence in the market. ”
In terms of action on Friday, stocks snapped a three-session slip to end a troubled week, though the pandemic and election continue to increase uncertainty. More than half a dozen states, including Ohio and Michigan, reported a record number of new cases of coronavirus on Thursday, pushing the United States’ total daytime over 60,000 for the first time in over two months.