Friday, October 19, 2012

the 1987 crash (25 years ago)

The 23% Dow decline in 1987 hasn't been equaled since, not even during the 2008 crash. What was remarkable about the 1987 event was that the averages still ended 1987 with a gain. The market recovered all of its losses in about 15 months.

The Dow and the S&P 500 are still 6% and 8% below their 2007 peaks. The Nasdaq, however, is 5% over its 2007 high -- thanks especially to gains for Apple and Google.

The Dow's 508-point loss wasn't exceeded until Oct. 26, 1997, when the Dow fell 554 points as a financial panic in Asia hit markets. On Sept. 17, 2001, the first day of trading after the Sept. 11, 2001, terror attacks, the Dow fell 685 points.

The two largest one-day plunges occurred in the fall of 2008 after the Lehman Bros. collapse.

Today's problems are quite different from the 1987 crash, when the market fell due to program trading that fed upon itself throughout the day. Also, interest rates had been rising in the spring and summer.An overheated market ultimately fell over. There were worries about tax increases and a slowing economy as well.

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[see also five years ago]

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