The Dow Jones Industrial Average fell 508 points or 22%, triggering a reduction in the value of all U.S. outstanding stocks in the sum of $500 billion and earning that fateful day the unenviable title of Black Monday.
Prior to that wild meltdown, 1986 and 1987 had been banner years for the equity markets - fueled by hostile takeovers, leveraged buyouts and merger mania.
The response was quick and decisive as the Federal Reserve stepped forward to help during this event and pumped liquidity into the system by lowering short term interest rates. Experts believe that it was the quick thinking on the part of the Fed that enabled both the Dow and the S&P 500, which had fallen to 225.06 from 282.7 on Black Monday, to regain their lost value within 24 months.
The relatively quick recovery eliminated the very serious possibility of a recession. There was no repeat of the sorrowful recession and depression that followed the 1929 crash.
Brought to you, courtesy of The Mortgage Market Guide
