Definition
The term Black Monday refers to October 19, 1987, when the stock market would lose 22% of its value in a single day as measured by the Dow Jones Industrial Average. Black Monday is considered to be one of the most infamous trading days in the history of investing.
Explanation
On October 19, 1987, more commonly referred to as Black Monday, the Dow Jones would fall 508 points, or lose 22% of its value, in just a single day. Investors would also lose an estimated $500 billion in assets. Black Monday would signal the beginning of a global decline in stocks, with markets around the world losing 20% or more by the end of the month.
The magnitude of the decline on Black Monday is attributed to a combination of panic selling by investors and program trading. There was no event, or announcement, that would have explained the steep drop in stock prices. As investors began selling shares that day, computerized trades such as stop loss orders were triggered, flooding the market with additional sell orders. Following the Security and Exchange Commission's (SEC) investigation into factors that contributed to the rapid sell off of stocks, several guidelines were introduced into the marketplace. The most notable guideline is the circuit breaker concept, which halts trading under certain conditions.
Related Terms
The term gray swan event refers to an incident of sizable impact, which can be anticipated, but has a relatively low probability of occurring. Often recognized in hindsight, individuals assume the risk of a gray swan event when they invest in financial markets.
Moneyzine EditorJanuary 19th, 2024
The term Kennedy Slide of 1962 is used to describe the decline in the stock market that occurred between December 1961 and June 1962. Although the exact cause of the Kennedy Slide of 1962 was never isolated, it was thought to be a result of a swift change in investor sentiment.Moneyzine EditorJanuary 23rd, 2024
The term circuit breaker refers to the policies and procedures that halt or stop trading when securities fall by a given percentage over a specified period of time. Circuit breakers were put into place by the Securities and Exchange Commission following the Stock Market Crash of 1987.Moneyzine EditorJanuary 11th, 2024
The term Black Thursday refers to October 24, 1929, which marked the beginning of the Stock Market Crash of 1929. On Black Monday, the Dow Jones Industrial Average would fall 33 points, which was approximately 9% of its value.Moneyzine EditorJanuary 8th, 2024
The term Black Tuesday refers to October 29, 1929, which marked the end of the Roaring 20s, and the starting point of the Great Depression. On Black Tuesday, the Dow Jones Industrial Average would fall 30 points, which was around 12% of its value.Moneyzine EditorJanuary 8th, 2024
