Black Monday refers to the severe and unexpected global stock market crash that occurred on October 19, 1987. On this day, the Dow Jones Industrial Average (DJIA) plunged 508 points, a loss of 22.6%-the largest one-day percentage drop in its history. The S&P 500 also suffered a similar decline, around 20.4% to 30%, marking a catastrophic loss in stock values worldwide, estimated at about $1.71 trillion
. The crash was triggered by a combination of factors including fears that stocks were overvalued, persistent U.S. trade and budget deficits, rising interest rates, and a loss of confidence in government efforts to stabilize currency markets. The use of computerized program trading strategies, such as portfolio insurance and index arbitrage, accelerated the sell-off as automated systems triggered massive sell orders, exacerbating the market decline
. The crash caused widespread panic, dominating media coverage and raising fears of a severe economic downturn similar to the Great Depression. However, swift actions by central banks, particularly the U.S. Federal Reserve, which cut interest rates and provided liquidity, helped stabilize the markets. The crash's impact on the real economy was relatively limited and short-lived in most countries, though some, like New Zealand, experienced longer-term negative effects due to their monetary policy responses
. In response to Black Monday, regulatory measures such as trading curbs and circuit breakers were introduced to prevent similar market panics in the future. Despite the severity of the crash, stock markets recovered much of their losses within months, and by less than two years, U.S. markets had surpassed pre-crash levels
. In summary, Black Monday was a historic stock market crash driven by a mix of economic concerns and automated trading, which led to a dramatic one-day loss but was ultimately contained through coordinated monetary policy and regulatory reforms.
