Yesterday marked three decades since the 1987 stock market crash, but could it happen again?
The 1987 stock market crash was relatively minor in the context of history. Rather than ushering in an economic depression, the stock market quickly recovered.
One of the problems with the media’s perspective on the stock market is that they assume that the crash is the bad thing, rather than realizing that the massive bubble in the stock market is always the real problem. The crash is a solution to the problem.
Yesterday, Reuters asked, “Could the 1987 stock market crash happen again?”
On the 30th anniversary of the 1987 stock market crash, U.S. stocks are at a record high and investors are concerned that steep valuations may mean a correction is overdue, despite healthy corporate earnings and economic growth.
But could a repeat of “Black Monday” happen today? Modern trading technology, changes to the way stock exchanges operate and in the way investor funds are managed should make a repeat of the 1987 crash unlikely. Yet cautious traders refuse to rule it out.
“We have learned a lot from the mistakes of the past in terms of the reaction or over reaction,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.
On Monday Oct. 19, 1987, following large declines on Asian and European markets the previous week, the Dow Jones Industrial (.DJI) Average plunged 508 points, or 22.6 percent, for the biggest-ever single day decline in percentage terms by the blue-chip benchmark.
A decline of up to 20 percent in one day is possible today, but it would likely be a more orderly process, said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“We have the ability to shut things down for a period of time and reassess and try to ascertain what is the best way to get back in business and take a calmer look at things,” he said.
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