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Black Monday:  History Can Calm our Fears

October 19, 2022
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 Today is the 35th anniversary of the day known as “Black Monday”.

On Oct. 19, 1987, the Dow Jones Industrial Average DJIA, -0.44% plunged 508 points, a decline of almost 23%, in a daylong selling frenzy that ricocheted around the world and tested the limits of the financial system. The S&P 500 SPX, -0.78% dropped more than 20%. At current levels, an equivalent percentage drop would translate into a one-day loss of over 7,000 points for the Dow.  (marketwatch.com)

 "People were coming out for their smoking breaks and they looked shellshocked," NPR's former economic correspondent Barbara Mantel reported from outside the New York Stock Exchange on Black Monday. "They were using words like hysteria, panic to describe what was going on inside." (NPR.org)

 Nevertheless, the markets did bounce back.  In fact, Stock markets quickly recovered a majority of their Black Monday losses. In just two trading sessions, the DJIA gained back 288 points, or 57 percent, of the total Black Monday downturn. Less than two years later, US stock markets surpassed their pre-crash highs. (Federalreservehistory.org)

 Another example: in the 2008 Recession, the market was down and the popular American Funds ICA fund was down 34%; the following 12 month, it made 27.2% and an additional 10.0% the following year.  (American Funds, 2021).  So given what is happening now, where can we logically expect to be in 2025? 

 History shows us that investing is a long-term journey.  While it is easy to panic when you open your statement, we know that they will eventually recover eventually and get back on track.