The Stock Market May Be Poised for a Replay of the 1987 Crash

As the Dow Jones Industrial Average notched its ninth straight record close on Monday, one market historian says equity markets could be headed for a 1987-level correction.

The Dow's recent run-up is reminiscent of the index's steep climb heading into the stock market crash of October 19, 1987, according to New York University financial historian Richard Sylla. Better known as Black Monday, the 1987 crash saw Dow lose 22% in a single day, its worst one-day percentage drop ever.

"I suspect we are in the late stages of a long bull market," Sylla said in an email. "I see parallels with 1987 when the Dow increased by a hundred points ever few weeks before crashing on October 19 in the biggest one-day percentage loss ever. Since Trump was elected, we have seen the Dow hit 19, 20, 21 and lately 22 thousand -- reminiscent of 1987."

The Dow was up more than 40% at its August peak in 1987, a much steeper climb than its roughly 11% year-to-date gain in 2017. But in both circumstances, the stock market saw a seemingly unstoppable advance.

Source: Bloomberg 

Junior Trader Stefan Panteleev

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