Black Monday
In finance, when people use the term Black Monday, they are most often referring to October 19, 1987. Prior to 1987, this term was most often associated with October 28, 1929.
Black Monday 1987
October 19, 1987 was the worst single day in history for equity markets in the United States. The S&P 500 lost 20.5%. Over the five business days up to and including October 19, the S&P 500 was down 27.3%.
Markets in other countries were also severely impacted. When markets opened on Tuesday in Asia, the Nikkei fell 14.9% and the Hang Seng Index fell 45.8%. In the UK, the FTSE dropped 10.8% on Monday and 12.2% on Tuesday.
Many explanations have been put forward for Black Monday. The growing use of portfolio insurance in the United Sates likely played a role. Firms providing portfolio insurance were required to take increasingly large short positions as the market went down, creating a feedback loop in which market declines led to selling, which led to further market declines, which led to more selling, and so on. Equity index futures, which were introduced in the United States just five years earlier, in 1982, may have facilitated the rapid drop in index levels.
Surprisingly, there seemed to be no significant impact on the broader economy. The S&P 500 quickly rebounded, and was down only 11% after 10 days. Real US GDP increased in 1987.
Today, Black Monday 1987 is one of the most widely used historical scenarios for stress tests.
Black Monday 1929
On October 28, 1929, the Dow Jones Industrial Average fell 12.8%. This was one of three “black” days in October 1929,
October 24, 1929, Black Thursday, −9.9%
October 28, 1929, Black Monday, −12.8%
October 29, 1929, Black Tuesday, −11.7%
The market crash in October 1929 is seen by many historians as the start of the Great Depression, which lasted until 1939.