Traders Fear Another Black Monday, But Market Data Says Otherwise
Key Summary
Despite a viral essay and social media warnings, market data suggests that a repeat of the 1987 Black Monday crash is unlikely. The S&P 500 is within 2% of its record high, and companies are reporting strong earnings growth. Index futures pricing indicates mildly higher prices for Dow contracts, and the pace of declines prior to Black Monday was much worse. Today's market lacks key mechanisms that contributed to the 1987 crash, making a repeat highly unlikely.
Precedent & Market Context
The 1987 Black Monday crash was a pivotal event in the history of the stock market. On October 19, 1987, the Dow Jones Industrial Average plummeted 22.6% in a single day, causing widespread panic and chaos. However, despite the anniversary of this event today, market data suggests that a repeat of the crash is unlikely.
Main Event
Today is the anniversary of Black Monday, but traders seem to be getting spooked over the weekend by suggestions of a repeat performance. However, despite little to no pricing evidence of an impending market crash, traders seemed to latch onto the idea of a bear market in AI stocks, enamored with a viral essay about a “stealth” bear market supposedly festering within otherwise bullish indices like the S&P 500. Market commentators posted calls for a Black Monday, racking up millions of combined views.
Analysis & Market Impact
The S&P 500 is within 2% of its record high, and companies are reporting strong earnings growth. Index futures pricing indicates mildly higher prices for Dow contracts, and the pace of declines prior to Black Monday was much worse. Today’s market lacks key mechanisms that contributed to the 1987 crash, making a repeat highly unlikely.
Implications & Outlook
In contrast to 1987, today’s market isn't already in freefall. In August 1987, the Dow peaked at 2,722 and had lost about 17.5% by the Friday close before the crash. Today’s Dow, however, is within 4.5% of its all-time high. The S&P 500 is similarly within 2% of a record high today. The pace of declines prior to today is also bad news for doomsayers who think today will end in catastrophe.