Rates, Inflation, Oil, War: Could a 1987-Style Crash Be in the Cards?
Thursday, October 19, marked the 36th anniversary of the infamous 1987 crash, a day etched into the annals of financial history as Black Monday.
From August 1982 to August 1987, the 19 largest global markets collectively saw an astonishing average return of +296%.
During this period, the Dow Jones Industrial Average skyrocketed from 776 to 2,722 points, including a remarkable 44% surge in the first eight months of 1987 alone. This eerily prescient statement was uttered by economist John Kenneth Galbraith in an article in The Atlantic back in January 1987:
«It will be a day of reckoning when the market descends as if it were never going to stop.»
Little did he know that his words would soon be realized.
The Dow Jones experienced its most substantial single-day plunge in history — a grim record that endures to this day — as ut tumbled by an astonishing -22.6%, or 508 points, surpassing the prior record of a -20.5% drop at the conclusion of 1914 when the market had been shuttered for several months due to World War I.
Here are the 8 biggest one-day drops in the history of the Dow Jones:
Even before Black Monday, in the three previous sessions, the market had already fallen by -3.8%, -2.4%, and -4.6%, respectively, foreshadowing what was to come.
The disaster spared no one. Warren Buffett lost $347 million, Bill Gates lost $255 million, and the family of Sam Walton, the founder of Walmart (NYSE:WMT), lost $1.75 billion.
Outside of Wall Street, there was also bloodshed, with the Canadian stock market down -22.5%, the S&P 500 down -20.5%, the Japanese Nikkei 225 down -14.9%, and the British FTSE 100 down -12.2%.
In 1987, the economic and geopolitical backdrop was notably unfavorable. It included a substantial trade deficit,
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