Tag: 1987

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October – a notorious month for volatility and for stock market crashes

Stock crash and depression 1929

October has historically been a month of significant stock market volatility, with notable crashes occurring in 1929 and 1987

Now we are already part way through October 2024, investors are understandably cautious, wondering if history might repeat itself.

1929

The Wall Street Crash of 1929, also known as the Great Crash, began on 24th October 1929, with Black Thursday, followed by Black Tuesday on 29th October 1929. The Dow Jones Industrial Average (DJIA) plummeted nearly 13% on Black Monday and an additional 12% on Black Tuesday.

This crash marked the beginning of the Great Depression, a period of severe economic downturn that lasted for over a decade. The 1929 crash was precipitated by a combination of speculative investments, excessive leverage, and a lack of regulatory oversight, leading to a massive sell-off as panic spread among investors.

The 1929 crash marked the beginning of the Great Depression, a period of severe economic downturn that lasted for over a decade

1987

In contrast, the stock market crash of 1987, known as Black Monday, occurred on 19th October 1987, when the DJIA dropped by 22.6% in a single day. Unlike the 1929 crash, the 1987 crash did not lead to a prolonged economic depression. Instead, it was a sharp correction in an otherwise strong bull market. The causes of the 1987 crash included program trading, overvaluation, and market psychology.

The rapid recovery following the crash was aided by swift intervention from the Federal Reserve, which provided liquidity to stabilize the markets.

Comparing these historical crashes to today’s stock market, several differences and similarities emerge. The current market environment is characterized by high valuations, geopolitical tensions, and concerns about inflation and interest rates.

However, today’s markets are also more resilient due to advanced technology, better regulatory frameworks, and more sophisticated risk management practices.

The likelihood of a significant stock market crash in October 2024 is difficult to predict. While some analysts argue that the market is due for a correction, others believe that the underlying economic fundamentals remain strong.

The lessons from 1929 and 1987 highlight the importance of investor psychology and the impact of external shocks on market stability.

Conclusion

In conclusion, while October has a notorious reputation for stock market crashes, the probability of a crash in October 2024 is uncertain. Investors should remain vigilant, diversify their portfolios, and avoid speculative investments to mitigate potential risks.

By learning from past crashes, we can better navigate the uncertainties of the current market environment and prepare for any potential downturns.

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Japan’s Nikkei suffers worst day since the Black Monday crash of 1987

Japan stocks crash!

Japanese stocks entered a bear market on Monday 5th August 2024 as the sell-off in Asia markets continued from the previous week. The Nikkei 225 fell over 12%

These benchmark indices have now declined more than 20% from their peak on 11th July 2024 – the index then touched 42000.

The Nikkei suffered over a 12% loss, closing at 31458, marking its worst performance since the ‘Black Monday’ of 1987. This drop of 4451 points is also the largest point loss in its history.

Year to date, the Nikkei has relinquished all its gains, shifting into a negative territory.

Nikkei one year chart

Nikkei one year chart

Nikkei one day chart – down 12.4% on the day a total of 4451 points

Nikkei one day chart – down 12.4% on the day a total of 4451 points
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October and the stock market

Doom & Gloom

1987 October stock market crash

October is a special month in the stock market for several reasons. It is the month when some of the most spectacular market crashes have occurred, such as in 1929 and 1987. 

However, it is also a month that has historically performed well on average, with a 0.6% price gain for the Dow Jones Industrial Average from 1928 to 2022. 

The month of October also marks the beginning of a seasonal pattern that favours stocks, as the fourth quarter and the winter months tend to see strong rallies. The ‘Santa’ rally may also visit.

Swings

However, October can also be a volatile month, with significant swings in both directions. It is the only month where all major indices have recorded losses of at least 17% (in 1987 and 2008), but also the month where the S&P 500 and the Dow Jones Industrial Average have posted their highest percentage gains of any month (in 1974 and 2022).

Therefore, investors should be prepared for potential turbulence and seek professional advice to navigate the market. Do your research!

RESEARCH! RESEARCH! RESEARCH!

Read-all-about-it, 1987 October stock market crash!

Additionally, October may face some special factors that could affect the market performance this year, such as the ongoing strike action, the rising inflation and interest rates, and the political uncertainty in the U.S. over the debt ceiling and government spending. These factors could create headwinds or even opportunities for different sectors and industries, depending on how they are resolved.

Summary

In summary, October is a month that has a mixed reputation in the stock market, with both risks and rewards. Investors should be aware of the historical trends and the current events that could influence the market direction.

Doom & Gloom
‘How bad can October really get?’ ‘Remember the 1987 crash?’