Two numbers mesmerized stock investors this week: 23,000, the latest milestone the Dow Jones Industrial Average surpassed, and 1987, the year of the biggest one-day crash in stock market history, whose 30th anniversary we commemorated Thursday.
(Another big number that got investors’ attention: 51-49, the Senate vote that approved the new federal budget, a necessary step to achieve tax reform, whose prospects appear to be the main reason stocks continue to rise.)
Dow 23,000 symbolizes a bull market that even after 8 ½ years doesn’t look tired. October 19, 1987 was a stark warning of what can happen when markets have gone too far and investors get too complacent.
As I wrote in my MarketWatch column this week, the crash of 1987 was the culmination of nearly two months of market turmoil. Stocks actually peaked on August 25, 1987, and the week before Black Monday was the worst ever.
On Friday, October 16, 1987 the Dow racked up a 4.6%, 100-point-plus one-day loss, which set a record, too. But nothing prepared investors for Black Monday’s 508-point, 22.6% decline.
So, what does it have to do with us today?