From Black Monday Thirty Years ago this Month to Today’s Stock Market High at 23,000

By Jack J. Kelly

Thirty years ago this month was Black Monday, one of the biggest single-day stock market drops in U.S. history.

At the time, although I was only a  five year old boy, (okay, add on another ten years), it seemed like the end of the world.  The Dow Jones Average ,(which is an index of 30 major blue-chip companies which are supposed to represent and benchmark the entire stock market), on October 19, 1987, plummeted 508 points which was 23% to 1,738.74.  To put this into perspective, at today’s market height, a percentage fall of that magnitude would crush the index over 5,200 points.

The crash was blamed on a number of factors including the growing complexity of the market, unbridled computerized program trading,  excessive valuations,  hedging strategies that didn’t work well, lack of liquidity when needed, as well as other factors.  Does this sounds eerily similar to some of the things happening today?

Now, just two days shy of the 30 year anniversary of this historic event, the Dow hit a record 23,000 for the first time in its 121-year history.  This is part of an amazing bull market rally that began nearly nine years ago, shortly after the financial crisis.

It is pretty wild given that while the market is soaring we are all angst ridden, fearful, and worried over North Korea and nuclear war, a new cold war with Russia, unrest in the Middle East, refugee crises, hurricanes, floods, political and social tensions in the US and, despite Sunday’s win, the New York Giants are most likely done for the year.

This year has been full of other milestones for the Dow Jones industrial average.  The stock index has rallied more than 3,200 points, gained in excess of 16%, and skyrocketed to 20,000, 21,000, 22,000 and then 23,000 in 2017.

The Dow reached the milestone only 76 days after first hitting 22,000.  If the Dow stays at this price as of the close today, it would mark one of the all time fastest 1,000-point increase in the index’s history .

The stock market gains have been attributed to optimism surrounding President Donald Trump’s proposed tax cuts, infrastructure spending plans, deregulation efforts, and push to increase hiring and creating more jobs.  Solid corporate earnings, and a positive economic outlook have helped fuel the stock market as well.

Since the 2016 election, the Dow has climbed 25.4%, the S&P 500 index grew 20%, the Nasdaq Composite Index returned about 28%, and the small companies index, the Russell 2000, jumped 26%.

On a somber note, usually bull markets like this one are accompanied by at least a 5 to 10 percent correction.  It is rare for stocks to go straight up.  There is almost always a pullback along the way.  Since a stock market correction has been missing, there is a little fear that when it does arrive, which it always does, it will be a big shock.  But until that time, things look pretty good, at least for today.

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