10 Vintage Photos Show How the Stock Markets Crashed on Black Monday

Following a few years of economic strength, stock prices climbed up 44% in the first half of 1987, creating an asset bubble that began imploding on October 16, when reports of a growing trade deficit started spreading.

By the time the markets closed on Friday, October 16, 1987, economic uncertainty signaled what would come at the beginning of the week as the Dow Jones began to decline, seeing a 4.6% downturn by the end of the day.

That Saturday, Treasury Secretary James Baker’s proposal to devalue the US dollar to minimize the growing trade deficit escalated anxieties, heightening financial panic.

By 1987, investors had begun using computerized trading programs designed to send sell or buy orders whenever stock prices behaved a certain way.

The Black Monday crash showed how these early technologies affected the market during a drastic downturn.

New automated portfolio insurance tools used software to automatically sell stocks whenever they dropped below a certain price. These programs automatically sold a large number of stocks, overwhelming the market and further contributing to the accelerated financial downturn.

As news of the crash spread through Wall Street and beyond, investors rushed to sell in frantic efforts to save their funds. The panic only made more and more traders sell their stocks, pushing the markets further down.

Hours before Wall Street even opened, stock markets in Asia felt the shockwaves of the financial downturn, which quickly became a global concern.

London saw a significant downturn, with the Financial Times Stock Exchange 100 index dropping over 10%, as reported by The Guardian. Meanwhile, in Hong Kong, the panic caused the stock exchange to close for days.

In response to the market panic, the Federal Reserve lowered interest rates by half a percentage point. Chairman Alan Greenspan also released a public statement declaring the institution’s commitment to providing liquidity.

These actions helped slow the market downturn and prevent the panic from accelerating further.

The sudden market crash put people’s retirement and savings funds at risk.

As the global markets plunged, newscasts turned their focus to the economy. However, the technologies mass media relied on at the time — mostly newspapers and TV news — failed to update consumers quickly enough about the market movements as they progressed by the minute, adding to the existing panic and heightening the misinformation experienced in and outside Wall Street.

Following the crash, the US Securities and Exchange Commission began asking stock exchanges to employ circuit breakers to halt market activity during extreme volatility. This aimed to both prevent panic from spreading and incentivize traders to think through their decisions.

The circuit breakers have only been used a handful of times since their inception, including during the early days of the COVID-19 pandemic and, most recently, following Trump’s tariff announcements.

On Black Monday, the New York Stock Exchange lost over $500 billion in market value, according to Goldman Sachs.

However, the markets were able to begin recovering in the following weeks, and by 1988, the markets had surpassed their pre-crash record high.

Although short-lived, the financial crash helped reform the stock exchanges and put mechanisms in place to prevent a drastic downturn and widespread panic from impacting US and global markets.