Twenty-five years ago on October 19th, the Dow Jones Industrial Average fell 508 points, just over 22 percent, the biggest one-day percentage drop in history. The crash was so severe that it usurped the use of the term Black Monday, which had previously been used to describe the two-day crash in 1929 that led to the Great Depression.
Ironically, the stock market ended up for the year in 1987, having opened on January 2, at 1,897 and closing on December 31 at 1,939. However, it would be almost two years until the market overtook the highs for the year that occurred before the crash.
After Black Monday, the so-called circuit breakers were implemented to reduce the chances for such spectacular, all at once, market drops. These curbs were revised and expanded to individual stocks after the “flash crash” of May 2010.
Most interesting for students of personal finance is that while events like these can be punishing over the short-term, they fade quickly into the realm of past returns for long-term investors. Remember that just a decade later, in 1997, the stock market was in the middle of a major rally which would continue for several years until the popping of the so-called Internet Bubble in 2002.
These days, the highs of pre-dating the 2002 meltdown are a distant memory, long ago eclipsed, while the market and the slow, but sure, U.S. economic recovery work on taking the market back above the pre-2008 levels before the “Great Recession.”