Everyone forgets the most important thing about the Black Monday stock market crash of 1987

1987 economic growthUBSGDP growth never went negative in the years surrounding the crash.

29 years ago on Wednesday, the Dow Jones Industrial Average plunged a gut-wrenching 508 points
or 22.6% — down to 1,738.74 on what is now referred to as Black Monday
It was by far the largest one-day percentage drop in US stock market history.

But as scary as that October day was, US economic growth was ultimately resilient, and gross-domestic-product growth never went negative. This is arguably the most important thing to remember about the whole ordeal.

Now, that’s not to say the stock market has no effect on the economy. Indeed, a huge sell-off could slow the economy and even lead it into a recession.

But experts don’t consider recessions triggered by stock market crashes to be as bad, relatively speaking.

Last year, Lombard Street Research’s Dario Perkins compared the effect on GDP from both the dot-com stock market crash of 2000 and the sub-prime-mortgage crisis of 2007-2008. GDP continued to rise during the former, but it got slammed in the wake of the latter.

Going back to stocks, it’s encouraging to remember the stock market didn’t die that day. The Dow is up about 16,377, or 940%, in the past 29 years.

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