Now 25 years later, we spoke with U.S. Economist to Stephen Guilfoyle from Meridian Equity Partners, to help us relive Black Monday and put into perspective what has changed since the events of the stock market crash of 1987 and what investors can ultimately learn from that event.
On Monday October 19, 1987 stock markets worldwide crashed, beginning in Hong Kong , then spreading to Europe, and finally hitting the United States.
Wall Street suffered its greatest loss ever in a single day on what is referred to as Black Monday as the Dow Jones Industrial Average (DJIA) plummeted 508 points, while the S&P 500 dropped 20 percent and the Nasdaq lost 11 percent.
To put this into perspective, the second worst day in the history of the Dow came on October 28th, 1929, when it dropped 13 percent the day before the stock market crash of 1929.
Blame for the crash has been given to such reasons as program trading, portfolio insurance and derivatives and prior news of worsening economic indicators such as a falling U.S. dollar.
Despite what happened in 1929, the market rallied immediately after the crash, posting a record one-day gain of 102 the very next day and 187 points on Thursday October 22.
Many feared the crash would cause a recession, but the Federal Reserve made a quick response and started pumping money into banks.
It took two years for the Dow to recover completely and By September 1989, the market regained all of the value it lost in the 1987 crash.