Today is the 25th anniversary of “Black Monday”: the largest single day percentage drop in the stock market in history. Art Cashin offers some interesting recollections of the day from a front row seat:
On this day (+1) in 1987 (that’s 25 years ago, if you are burdened with a graduate degree), the NYSE had one of its most dramatic trading days in its 220 year history.
It suffered its largest single day percentage loss (22%) and its largest one day point loss up until that day (508 points). No one who was on the floor that day will ever forget it.
While it was an unforgettable single day, there were months of events that went into its making.
The first two-thirds of 1987 were nothing other than spectacular on Wall Street. From New Year to shortly before Labor Day, the Dow rallied a rather stunning 43%.
Fear seemed to disappear. Junior traders laughed at their cautious elders and told each other to “buy strength” rather than sell it, as each rally leg was soon followed by another.
One thing that also helped banish fear was a new process called “portfolio insurance”. It involved use of the newly expanded S&P futures. Somewhat counterintuitively, it involved selling when prices turned down.
The rally topped out about August 25th with the Dow hitting 2722. Interest rates had begun creeping up amid concerns of early signs of inflation.
As I think I’ve mentioned before I was sitting in a client’s office when the drop began. This particular client had realtime stock reports coming in on a monitor on his desk, a rarity at the time, and we watched the dramatic events unfold as they happened.