Last week marked the 30-year anniversary of Black Monday,
a notorious day in financial history when the Dow Jones lost nearly 22 percent
and stock markets around the world
crashed. This was the biggest single-day stock market collapse in history.
Several other stock market crashes have also happened in October, including The
Panic of 1907, and Black Tuesday, Thursday and Monday (1929). With only a few more days in October, we asked Driehaus College of Business Assistant Professor Lamont Black, who researches banking, corporate finance and macroeconomics, whether this could happen again.
“Any day could be a Black Monday,” says Black, who teaches commercial banking and money and capital markets and is also the academic director for the Center
for Financial Services. “Stocks generate returns because of the risk
involved, so the risk is inherent to the stock market. However, these types of
‘black swan’ events are almost impossible to predict.
“Even the idea that October is a good month for a market
crash is probably a statistical anomaly. I think investors should be more
focused on trying to assess the likelihood of a major market correction in the
range of a 5 to 10 percent decline. With the stock market at all-time highs, it
is only a matter of time before this happens.
“We are in a bull market that has already gone longer than
most would have expected. The excitement of the stock market is deciding when
to invest more and when to hedge.
“Despite the risks, there are still plenty of reasons to
hope for more gains ahead.”
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