The Market Crash of 1987 – Overview
On one single day, 19th of October 1987, also known as “Black Monday”, the
– S&P 500 index lost 20.5%, the
– Dow Jones Industrial Average index lost 22.6% and the
– NASDAQ Composite index lost “only” 11.3%.
But this severe one-day US stock market panic also affected other international stock markets.
S&P 500 is a registered trademark of Standard & Poor’s Financial Services LLC. DOW JONES INDUSTRIAL AVERAGE is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NASDAQ COMPOSITE is a registered trademark of The Nasdaq Stock Market Inc.
Severe US Stock Market Crash
Market Crash – Potential Reasons
Besides the rapid psychological shift of the market participants, the following, traditional, potential reasons for the stock market panic of 1987 could be:
- rapidly increasing short term US interest rates – the annualized yield of 3 Months US Treasury Bills rose from 5.30% on 20th of January 1987 to the highest close of the year: 7.19% on 14th of October 1987 – an increase of 189 basis points
- rapidly increasing long term US interest rates – the yield of 30Y US Treasury Bonds increased from the low of the year: 7.29% on 9th of January 1987 to the high of the year: 10.25% on 19th of October 1987 – an increase of 296 basis points
- weakening US Dollar – US Dollar showed weakness against major foreign currencies
- deteriorating US current account deficit
- escalating US government debt
- very high price-earnings-ratios (P/E)
- meager dividend yields
- very bullish investor sentiment figures and too much optimism by investors
- deteriorating “market breadth” – weak advance-decline-line and new highs versus new lows
BUT there were no critical events or important news before the Black Monday in October 1987 justifying the drastic decline of US equities and the following severe drop of global share prices.
Market Crash 1987 – Key Indicators
Sniper Market Timing is providing this website and its information for guidance and information purposes only. The information contained herein has been compiled from sources deemed reliable. It is accurate to the best of our knowledge and belief; however, Sniper Market Timing cannot assure its accuracy, completeness, and validity and be held liable for any errors or omissions. All information contained herein should be independently verified and confirmed. Sniper Market Timing does not accept any liability for any loss or damage howsoever caused in reliance upon such information. Reader agrees to indemnify and hold harmless Sniper Market Timing from and against any damages, costs, and expenses, including any fees, potentially resulting from the application of any of the information provided by Sniper Market Timing. The Sniper timing system has not been applied over a significant period in real trading. Recommendations made in the future may or may not equal or better the Sniper timing system’s performance as simulated by historical backtesting.
The analysis, ratings, and/or recommendations made by Sniper Market Timing, snipermarkettiming.com, and/or any of its suppliers do not provide, imply, or otherwise constitute performance assurance. Past actual or simulated performance is no guarantee of future results. Therefore, it should not be assumed that future results will be positive or will equal past performance, real, indicated, or implied. Sniper Market Timing offers no assurance regarding the accuracy, market predictive powers, suitability, or effectiveness (either expressed or implied) of any of the information provided. This website has been prepared solely for informational purposes. It is not an offer to purchase or sell or solicit any offer to buy or sell any security or instrument or participate in any trading strategy. The trading instruments and the trading signals discussed on this website may be unsuitable for investors depending on their specific objectives and financial position. The trading instruments’ price or value to which this website relates, either directly or indirectly, may fall or rise against investors’ interest. Any market exposure always entails the possibility of substantial loss of equity. Reader agrees to assume all risk resulting from applying any of the information provided by Sniper Market Timing.
Additionally, to usual risks embedded with investing, international trading may involve the risk of capital loss due to fluctuation in currency values, from differences in accounting principles, or economic and/or political instability in foreign countries. Any commercial realization of the information provided by this website without written permission from Sniper Market Timing is strictly forbidden. Trademarks and copyrights mentioned on this website are the ownership of their respective companies. The names of products and services presented are used only in an educational fashion and to the benefit of the trademark and copyright owner, with no intention of infringing on trademarks or copyrights. Sniper Market Timing and/or its principals may purchase or sell any of the securities cited on this website.