Stock Market Crashes

1929, 1987, 2008

Stock Market Crash of 1929

After World War I, the United States of America underwent an economic expansion that occurred because of new technology and improved production. This decade was filled with electrical appliances, modern conveniences, and cheaper cars; all of these things helped catapult America into the Roaring 20s. The 1920s is also known as the rebirth for Americans. Because of the expanding economy, the stock market benefited immensely. At any point in time, one could strike up a conversation with an investor and he would tell you that great wealth could be made in the stock market. But, in only a few short years, this time of prosperity and wealth would come to a screeching halt. There are many reasons and events that led up to the Stock Market Crash of 1929. Many people blamed investors for "speculating" and driving up stock price values. During this critical time, there were three most infamous days that occurred: Black Thursday, Black Monday, and Black Tuesday. Statistics from each of these days and the impacts that they had America can be seen in the following link.

Stock Market Crash of 1987

In the first half of 1987, the U.S. dollar experienced a steep decline in value when in comparison to the other currencies of the world. This made American goods and services less expensive, which resulted in a rise of exports and one stock market record after another. In the previous years, the United States had underwent a corporate restructuring and companies were promising strong future earnings and growth. In September of 1987, the economic concerns over the weak dollar and rising interest rates started making investors nervous. Between October 14 and 16, the Dow fell dramatically and the market created a great deal of anxiety over the weekend. Investors were anxious about what would happen on Monday. On Monday October 19, 1987, the stock market plummeted right from the opening bell. The technology advances in the stock exchanges began to kick in, and these computerized systems accelerated the deadline. Portfolio insurance and program trading were intended to help investors, but instead, the systems and the lack of confidence in investors, was enough to drive down the Dow Jones 508 points in a single day. Investors lost over $500 billion dollars on Black Monday.

Stock Market Crash of 2008

On Monday October 6, 2008, the stock market would start a weeklong decline in which the Dow Jones Industrial Average would fall 1,874 points, equivalent to 18.1%. The exact causes of this stock market crash does in fact vary from the crashes of 1929 and 1987, however, they do all share one common element - they all began in October. Although history may state that the actual market crash occurred on Monday, October 6, the market experienced eight consecutive days of negative movement starting on October 1, 2008. During these eight trading days, the DJIA would drop a total of 2,399.47, equivalent to 22.11%. Statistics from these eight crucial days can be seen in the link below.

During the years preceding the stock market crash, the mortgage industry was thriving. People who had poor credit were allowed access to loans when, in all reality, they could not afford. As long as house prices were high, there were no problems. But in 2007, when house prices began to fall, problems began. People began to owe more than the worth of their home, and knowing this, homeowners were not scared of foreclosure. Instead, they simply abandoned their homes and started a new life somewhere else. As the problems began even more and more popular, the national economy started to falter and fear crept into the credit markets. There were many reasons that the stock market crashed in October of 2008 and some of these include: the credit market collapse, Bear Stearns' Collapse, Fannie Mae and Freddie Mac fall, and the growing financial instability in the United States when Bank of America agreed to acquire Merrill Lynch for $50 billion. The Black Week began on October 6, 2008 and statistics from this crash can be seen in the link below.