October 28-29, 1929: Marked the beginning of the great depression – although the worst of it was only a couple years later, this was a very powerful signal that something wasn’t right in the US economy. This was characterized mainly by a lot of margin debt purchasing and rampant speculation on equities.
1973 to 1974: Marked the beginning of the rise of OPEC, and concerns about the world supply of crude oil in general. Also marked the beginning of the modern currency exchange systems we see today. This was in the middle of a recession and a period of high inflation (these two together are referred to as “stagflation”) and is the worst possible combination for equity markets.
October 19, 1987 (aka “Black Monday”): Probably the only “true” random market crash, potentially caused with inexperience with complexity through computer program trading, and also the Treasury Secretary mumbling about having to devalue US currency. Federal reserve chairman Alan Greenspan was also new on the job at this time. The US recovered despite having lost 22.7% of its market value for the day. Hong Kong got killed by 45.8%; in all cases buying this crash would have been fruitful. Easy to say when looking at past charts!
October 13, 1989: A small random market crash (6.1% loss on the S&P 500) for no particular reason at all.
October 27, 1997: The S&P lost 6.9% due to the Asian currency crisis and panic selling. This was at the time of the beginning of the run-up in technology issues. Although this was somewhat interrupted by the Long Term Capital Management fiasco in 1998, equities never looked back until February 2000, where they peaked.
September 11, 2001: The largest terrorist attack on US soil, and the biggest death count since the Pearl Harbour attack in December 1941. Equities dropped when markets re-opened a week later, mainly due to insurance and financial firms that had to perform some massive re-balancing after liquidating assets. This would prove to be a local bottom, but not a true bottom until in 2002 when markets finally reached their lows for the decade (up until the 2008 financial crisis).
October 2007 to March 2009: Fresh in everybody’s memory, the financial crisis caused wholesale liquidations in major financial firms, such as Bear Stearns, Lehman Brothers, Wachovia, Washington Mutual, etc. From peak to trough, the S&P 500 lost 56% of its value.
… and after this history lesson, will January 25, 2010 be on the books?