Stock market crash – Black Monday – October 1987

Some possible reasons for the stock market crash of 1987 and for the rapid psychological shift of the market participants:

  • rapidly increasing short term US interest rates (the annualized yield of 3M US Treasury Bills increased from 5.30% on 20.01.1987 to the high print of the year: 7.19% on 14.10.1987 – an increase of 189 basis points)
  • rapidly increasing long term US interest rates (the yield of 30Y US Treasury Bonds increased from the low print of the year: 7.29% on 09.01.1987 to the high print of the year: 10.25% on 19.10.1987 – an increase of 296 basis points)
  • weakening US dollar (=falling against most major foreign currencies)
  • deteriorating US current account deficit
  • escalating US government debt
  • very high price-earnings-ratios (P/E)
  • very low dividend yields
  • very bullish investor sentiment figures (= too much optimism by investors)
  • deteriorating “market breadth” (e.g.: weak Advance-Decline-Line)



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