Black Monday Coming Soon?

October: The Month Of Market Crashes?

In finance, Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) fell exactly 508 points to 1,738.74 (22.61%). In Australia and New Zealand, the 1987 crash is also referred to as “Black Tuesday” because of the time zone difference.

The terms Black Monday and Black Tuesday are also respectively applied to October 28 and October 29, 1929, which occurred after Black Thursday on October 24, which started the Stock Market Crash of 1929.The events that have given October a bad name span 80 years.

They are:

• The Panic of 1907 (October 1907)
  A financial panic threatened to engulf Wall Street, mostly owing to threats of legislative action against trusts and shrinking credit. There were multiple bank  runs and heavy panic selling at the stock exchange. All that stood between the U.S. and a serious crash was a J.P. Morgan led consortium that did the work of the Fed before the Fed existed.
  
• Black Tuesday, Thursday and Monday (October 1929)
  The Crash of 1929 was bloodletting on an unprecedented scale because so many more people were involved in the market. It left several “black” days in the history books, each with their own record breaking slides.
• Black Monday (October 1987)
  Nothing says Monday like a financial meltdown. In 1987, automatic stop-loss orders and financial contagion gave the market a thorough throttling as a domino effect echoed across the world. The Fed and other central banks intervened and the Dow recovered from the 22% drop quite rapidly.

The S&P 500 has risen from 2083.79 to 2559.47 in the past 12 months. That is a 22.83% increase. It may feel good but fast rises can also result in fast declines. Historically a significant recession has occurred about every ten years during the past 100 years. While there have been declines since the Great Recession (Dec 2007 – June 2009) none have resulted in a major impact on the economy. I suspect we are due to have another decline in the near future. My thought that could be within the next year or two.

Are you ready?