Black Monday: The 1987 Stock Market Crash

[00:00:00] Welcome to another captivating episode of This Week in Wall Street History. I'm your host, Todd Schoenberger. Today we journey back to October 19, 1987, a day that forever etched its name in financial history books as Black Monday.

[00:00:22] On this fateful day, the Dow Jones Industrial Average, the bellwether of American stock markets plunged an astonishing 22% losing a jaw-dropping 508 points. This was a day that sent shockwaves through the financial world and left traders and investors in a state of disbelief.

[00:00:40] The events leading up to Black Monday were complex and multifaceted. The 1980s were a period of exuberance and rapid financial innovation. Wall Street was on an unstoppable upward trajectory, with a booming stock market and an ever-growing appetite for risk. However, beneath the surface there were ominous signs.

[00:01:00] The market had been surging at an unsustainable rate and concerns about trade imbalances and the US dollar's strength were growing. In the weeks prior to Black Monday, dark signs were emerging. On October 14, 1987, the Dow lost 95 points, the largest single-day decline since the 1929 crash.

[00:01:19] A confluence of factors including rising interest rates, program trading, and increasing tensions in the Middle East exacerbated the uncertainty. This perfect storm of events ultimately led to the historic crash. Monday was a day of panic and confusion.

[00:01:35] The market's decline was so sudden and severe that it overwhelmed traders and computerized trading systems. The selling frenzy triggered a chain reaction with margin calls, panic selling, and a cascading effect that further exacerbated the drop. It was, in essence, a self-fulfilling prophecy.

[00:01:53] Today unfolded, traders watched in disbelief as the Dow plummeted, shattering records. By the closing bell, the Dow had lost 22 percent of its value, the largest one-day percentage loss in history. In terms of points, the 508-point drop was unprecedented and remains one of the most

[00:02:11] significant market crashes in history. Here's a flashback report from Wall Street media legend Neil Cavuto reporting outside of the New York Stock Exchange. Well, there weren't exactly people fleeing themselves off buildings, at least not that

[00:02:24] we could see today, but there were a near-record number of people gathering outside the New York Stock Exchange today to sort of witness history in the making and the opportunity to see incredible drops in the Dow right before their eyes.

[00:02:36] I want to see what it looks like when it's in this condition. And then I wanted to see just stock market anyway. We want to see a piece of the action, I guess, at Wall Street.

[00:02:46] What they saw was programmed selling taken to the ultimate art form, as Wall Street's very biggest players stepped in and unloaded multi-billion dollar blocks of shares. To the end, market analysts are steadfastly refusing to even mention that word crash to describe what's going on right now.

[00:03:02] Instead, they like to look at it as a correction that still has to work itself out. But what they don't know and in fact readily worry about is how far down that correction

[00:03:10] really has to go, how long it will take, and exactly how many more people will be hurt in the process before the market does decide, if it decides to turn around. In New York, Neil Cavuto for the Nightly Business Report.

[00:03:22] Black Monday, October 19th, 1987 was a day that taught the world a sobering lesson about the perils of unchecked speculation and the dangers of financial euphoria. But from the ashes of that historic crash, lessons were learned, regulations were put in place, and markets eventually rebounded.

[00:03:40] Join us next time on Buy, Hold, Cells this week in Wall Street History as we explore more intriguing episodes in Wall Street's rich and colorful past. Buy, Hold, Cell brought to you by Crosscheck Management. The world's best known investor and Wall Street expert Warren Buffett once said,

[00:03:57] Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. Mr. Buffett's quote is remarkably accurate, but how many people would rather receive advice from him than someone simply guessing?

[00:04:09] Welcome to Buy, Hold, Cell, your single source for Wall Street knowledge and profitable guidance. Please join me, Todd Schoenberger and fellow trader Tobin Smith, as well as host Veronica Duto. For a podcast known to move the needle for investors, Tobin and I are seasoned

[00:04:24] Wall Street executives with deep investment experience and we are prepared to share our advice to those who choose to listen. Download Buy, Hold, Cell today on the Evergreen Podcast Network or your favorite podcast channel. How much do you understand the future of finance?

[00:04:41] I'm Jim Ruse, a top 10 banking influencer and host of the podcast, Banking Transform, where we dive deeply into the rapidly evolving world of banking and financial technology. Join me as I interview industry experts, thought leaders and innovators as they unravel

[00:04:58] the latest banking trends, disruptions and game changing technologies reshaping the world of finance. To find your understanding of the banking ecosystem, subscribe now to Banking Transform, available wherever you get your podcasts and now available on YouTube.