The 25 Year Anniversary of Black Monday & 3rd Quarter Earnings Reports
Monday, October 19, 1987, which occurred just over 25 years ago, is known as “Black Monday.”
From my college house, I watched, stunned, learning the Dow Jones Industrial Average fell -205 points, a 22% drop, in one day.
To put that ill-fated day into perspective, a 22% decline in the Dow Jones would be just about a 2,900 point drop today.
Can you imagine sitting and watching today’s 24 hour news cycle and seeing the market down 2,900 points? I can only imagine the craziness. Yet, somehow we all survived and now it’s just a story. It’s constructive to ask yourself how you’d react if that were happening today.
However, the stock market recovered and by years end, the Dow Jones was higher, rising 11.51% from October 19th to the end of the year on December 31, 1987.
In fact, for people with a long time horizon…oh say 25 years…the DJIA is up 494% since Black Monday.
On that note, here’s how markets finished the week.
Earnings
A couple of weeks ago, investors were mired in International Monetary Fund (IMF) and World Bank induced drama and gloom. But early releases, especially from the financials (which had been expected to do well), has given way to a more sobering view of how companies have been navigating the choppy economic waters.
Translation: Some high-profile disappointments took a toll on equities heading into the weekend.
Earnings caused some choppy trading last week, but much of the recent economic data is beginning to paint a brighter picture. Improvement in consumer confidence is translating into stronger sales at the nation’s retailers, according to the latest data from the U.S. Commerce Department.
Over the next few weeks, earnings will continue to pour in from many different industries. We are looking to see if the companies with big presence in overseas markets will offer up a clearer picture as to how the global economic slowdown is impacting operations.
Finally, the Federal Reserve meets on Tuesday for its two-day meeting, but don’t expect anything new following last month’s decision to buy $40 billion in mortgage-backed securities.
Please call or email with questions.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values. The 2, 10 and 30 year Treasury is simply the yield at the close of the day.
(1) West Texas Intermediate crude spot price is as of end of week.
(2) London Bullion Market Association; gold fixing pricing at 3 p.m. London time.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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