'Black Monday' happened 28 years ago today - and the most important market story of that year wasn't even about crashing stocks
UBSGDP growth never went negative in the years before and after the crash.
Twenty-eight years ago today, the Dow Jones Industrial Average plunged a gut-wrenching 508 points, or 22.6%, down to 1,738.74 on what is now referred to as Black Monday.It was by far the largest one-day percentage drop in US stock market history.
But as scary as that October day was, US economic growth was ultimately resilient, and gross-domestic-product growth never went negative. This is arguably the most important thing to remember about the whole ordeal.
This often-forgotten aspect of 1987 is a valuable lesson in light of the recent stock volatility, including that ominous August day when the Dow lost over 1,000 points in minutes.
This is not to say the stock market has no affect on the economy. Indeed, a huge sell-off could slow the economy and potentially lead it into a recession.
But experts don't consider recessions triggered by stock market crashes to be particularly bad.
Lombard Street Research's Dario Perkins recently compared the effect on GDP from both the dot-com stock market crash of 2000 and the sub-prime mortgage crisis of 2007/2008. GDP continued to rise during the former, but it got slammed in the wake of the latter.
Lombard Street Research
Going back to stocks, it's encouraging to remember the stock market didn't die that day. The Dow is up a whopping 15,477, or 890% in the last 28 years.