Comparing stock price volatility on “Black Monday” in 1987 and today

What are the similarities and differences between the big shock in the stock market in 1987, dubbed “Black Monday,” and today’s stock price volatility? Recently, the 10-year U.S. Treasury rate has been hovering around 5%, increasing financial market anxiety. This has raised concerns about recreating Black Monday.

Background on “Black Monday” in 1987

The shocking phenomenon of the S&P 500 falling 20% in one day occurred on October 19, 1987, on “Black Monday. The main causes were the collapse of coordination in international financial cooperation and the sharp rise in interest rates after the Plaza Accord of 1985. In particular, the adoption of different austerity policies by different countries has caused major disruptions in financial markets. Some say it was an error in the trading of a program that was almost new at the time, others say we don’t know what caused it, but the consensus is that it was the result of a failure of coordination between countries.

Analyze current stock market conditions

Fortunately, today’s stock market is very different from 1987 in many ways. The main differences are the continued strength of the U.S. dollarand the lesser urgency of rising interest rates compared to 1987. Inflation in major economies has also been slowing since last year, suggesting that there is no need to raise rates competitively.

Sector analysis to watch out for

There are a limited number of industries that have the potential for stock price growth when interest rate volatility is high. However, in the U.S., telecom services, tech, energy, healthcare, and utilities are relatively stable, and domestically, semiconductors, banking, and insurance are strong.

Conclusion

The differences between “Black Monday” in 1987 and today’s stock market conditions are vast in many ways. However, volatility in the financial markets is always unpredictable, so you need to be cautious when making investment decisions.

常見問題

• What was “Black Monday” in 1987?
  This refers to the event that occurred on October 19, 1987, when a stock index plunged more than 20% in a single day.
• What are the key differences between current stock price volatility and “Black Monday”?
  There is a big difference in the direction of the US dollar and the urgency of rising interest rates.
• What sectors do well when interest rate volatility is high?
  In the U.S., sectors such as telecom services, tech, and energy are strong, while domestically, semiconductors, banking, and insurance are strong.
• How can I prepare for volatility in the stock market?
  Given the volatility of the stock market, it’s a good idea to have a diversified investment strategy.
• What is the current situation with the US dollar?
  The US dollar has been in a bullish phase since July of this year.