Every year, when Oct. 19 approaches, people speak darkly of the crash. On that day in 1987, the Standard & Poor’s 500-stock index fell 20.5 percent. This is the crash of 2008.
After the 1987 crash, the New York Stock Exchange put in circuit breakers to assure that there could never be another day like that. The market will close before prices fall that far.
But so far in October — after only seven trading days — the S.&P. is down 22 percent. The only other time since the Depression that there was that large a fall within seven days was in 1987.
The market has been down every day this month, but it has not been a straight road down. The intra-day volatility has been extraordinary, a signal of the total uncertainty that has gripped investors as they ponder whether the latest government move will stem the credit crisis.
Another way this is different is that the 1987 crash brought prices down from levels that were not very far from their record highs, set in the previous August. Investors were stunned, but they had not felt badly before prices plunged. At the close Oct. 19, the S.&P., was down just 7.2 percent since the end of the previous year. By the end of December, the index was up 2 percent for the year. There was no recession.
This time, we were in a bear market before the October plunge began. Since the peak last Oct. 9 — a year ago today — the index is down 42 percent.
This year, there was a recession under way for the entire year — I believe — and by the time the crash began there was no doubt that the economy was in decline both in the United States and overseas.
Directly after the 1987 crash, the Fed slashed rates and made cash available to the banks. That helped to stem the panic. This year, the Fed had done all that and much more before the crash came.
http://norris.blogs.nytimes.com/
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