The Black Monday Crash
October 20, 2010 by Chip Wood
It was 23 years ago this week when the stock market suffered its biggest one-day loss in history. On "Black Monday" — Oct. 19, 1987 — the market plunged 508 points, or 22.6 percent, on a then-record 604 million shares. The point loss has since been exceeded, but not the percentage.
The crash began in Asia, with the Singapore market falling 33 percent. That was followed by a 17 percent drop in Tokyo and an 11 percent decline in Hong Kong. When the markets opened in Europe, London fell 22 percent, Zurich lost 14 percent and Frankfurt fell 13 percent.
When the New York Stock Exchange opened, the Dow Jones Industrial Average fell 104 points in the first hour. By mid-day the losses had leveled off around 200 points. But after 2 p.m. the Dow lost 100 points every 30 minutes, finishing the day down 508 points.
It turned out that October, 1987 did not mark the start of a bear market, but the end of one. The Dow actually rose 2 percent for the year. Within two more years it was setting new highs. We don’t know if that will turn out to be true of this period, of course. But a lot of very smart and very successful investors, from John Templeton to Warren Buffet, say that the best time to buy is during "a period of maximum pessimism." Does that sound close to where we are today?
— Chip Wood