Today marks the anniversary of Black Monday on October 19, 1987, when the Dow Jones plunged 22.6%, but current market data shows no repeat is in the works. Index futures point to a modest gain, with the Dow within 4.5% of its all-time high and the S&P 500 within 2%, whereas in 1987 the index had already lost 17.5% before the crash. Unlike 1987, the mechanisms that amplified the drop — portfolio insurance and the absence of circuit breakers — are gone: an S&P 500 decline of more than 20% can no longer occur within a single trading day. The S&P 500’s current valuation of 26 times trailing earnings, versus 23.3 in 1987, is comparable, but its companies are posting 29% annual earnings growth, against essentially flat earnings ahead of the 1987 crash.
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