Where were you on the eve of October 19, 1987 - Black Monday? Perhaps the date does not stir the same emotions as, say, September 11, 2001, but rest assured there is a solemn population of survivors of that cataclysmic day 20-years ago. The 23% drop in the Dow Jones Industrial Index that day ranks as the most dramatic move in the stock market in modern history. No other major market move comes close. It was an historic day that shook the foundations of our financial system and left many participants shell shocked.
I was no more than a market observer at the time, but the event left a mark on me. As the 20th anniversary of Black Monday hits us tomorrow we should all pause to consider the potential for another Black Swan - an outlier event of seemingly unimaginable possibility. Important to current investors to recall is the ominous feeling that hovered over investors on the weekend preceding October 19, 1987. The Dow Jones Industrial Index dropped 10% in the final days of the previous week and there was palpable concern heading into the weekend. The festering sore did indeed bust, and we should be wary of current day infections that have an equally dangerous potential to cripple the market.
For my part Black Monday Eve was tempered, indeed softened, by a weekend flight with my new born daughter as I introduced her to her grandparents for the first time. A reminder that life goes on - even in the midst of catastrophe.