Released: October 19, 2007

Crash of ‘87: Could it happen again?

Source: John Waggoner and Adam Shell, USA Today

Wall Street loves its sayings. Buy low and sell high. Don’t fight the tape. Don’t try to catch a falling knife. A useful one now might be one that historians often trumpet: Those who forget the past are doomed to repeat it.

Twenty years ago Friday, the U.S. stock market suffered its worst one-day drop ever: the Crash of ‘87. The Dow Jones industrials plunged 508 points, or 22.6%, as waves of selling swamped the New York Stock Exchange. It was a market dislocation so intense that some pundits predicted another Great Depression.

The dire predictions turned out to be wrong. But while one-day declines of that magnitude are extremely rare — one study says crashes are likely to occur once every 75 years — the Black Monday anniversary has prompted Wall Street to wonder: Can such a swift loss of wealth occur again?

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