Modern finance · 1950s–1990s
1987
Black Monday
The Dow falls 22.6% in a single day as selling feeds on itself.
On 19 October 1987 the Dow Jones Industrial Average fell 22.6%, its largest one-day percentage drop. Automated selling strategies and frightened investors sold at the same time, and prices fell faster than buyers could be found.
The Federal Reserve promised to keep the financial system supplied with cash, and within about two years the Dow was back above its pre-crash peak. Exchanges later added circuit breakers that pause trading during steep falls.
💡 Why it made sense then
Prices had climbed fast that year, and new computer-driven strategies were built to sell as prices fell, so a drop could set off more selling.
Ideas it gave us
- 🎯 Panic selling
Panic selling is selling investments because prices are falling fast and fear takes over, not because anything about the investment has changed. It turns a temporary fall into a permanent loss and often means missing the recovery.
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