Black Monday (1987)
In late 1985 and early 1986, the United States economy began shifting from a rapidly growing recovery from the early 1980s recession to a slower growing expansion, which resulted in a brief "soft landing" period as the economy slowed and inflation dropped. The stock market advanced significantly, with the Dow peaking in August 1987 at 2,722 points, or 44% over the previous year's closing of 1,895 points. Further financial uncertainty may have resulted from the collapse of OPEC in early 1986, which led to crude oil price decreasing by more than 50% by mid-1986.
The Black Monday decline was—and currently remains—the largest one-day percentage decline in the DJIA. (Saturday, December 12, 1914, is sometimes erroneously cited as the largest one-day percentage decline of the DJIA. In reality, the ostensible decline of 24.39% was created retroactively by a redefinition of the DJIA in 1916.)
Possible causes for the decline included program trading, overvaluation, illiquidity and market psychology.
