The Friday the 13th mini-crash is a fascinating event that's often misunderstood. It occurred on Friday, October 13, 1989, and was triggered by a combination of technical and economic factors.
The mini-crash was caused by a sudden and unexpected surge in interest rates, which led to a sharp decline in stock prices. This was largely due to the actions of a single individual, a trader named Ivan Boesky, who had been engaging in insider trading.
The Dow Jones Industrial Average plummeted 190.58 points, or 6.9%, in just one day, marking the largest single-day percentage drop in history at the time. This was a staggering loss for investors.
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Stock Market Crashes
Stock market crashes are sudden and substantial drops in stock prices, often caused by speculation, panic selling, and economic bubbles. They can have a major impact on the economy and take a significant amount of time to recover from.
A common standard for defining a stock market crash is a rapid double-digit percentage decline in a stock index over a couple of days. The effects of a crash can be devastating, but measures like trading curbs can help prevent or mitigate the damage.
The Dutch Tulip Bulb Market Bubble, also known as Tulipmania, is the earliest-known stock market crash, occurring in the mid-1630s when tulip bulbs skyrocketed in value due to speculation.
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Stock Crash Basics
A stock market crash is a sudden and substantial drop in stock prices, often caused by speculation, panic selling, and/or economic bubbles. This can happen amid economic crises or major events.
The effects of a stock market crash can be severe, taking a significant amount of time for the economy to recover. A common standard for a stock market crash is a rapid double-digit percentage decline in a stock index, such as the Standard & Poor’s 500 Index or Dow Jones Industrial Average (DJIA), over a couple of days.
Mini Crash on Friday the 13th
The Friday the 13th Mini-crash occurred on October 13, 1989, resulting in a 6.91% drop in the Dow.
This crash was a significant event in the stock market's history, but it's often considered a mini-crash due to the relatively small percentage loss.
Prior to the crash, a leveraged buyout deal for UAL, United Airlines' parent company, had fallen through, but it's unlikely that this was the cause of the crash, as UAL only accounted for a fraction of 1% of the stock market's total value.
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The failure of the UAL deal was seen as a watershed moment, foreshadowing the failure of other pending buyouts, but no concrete arguments have been offered explaining why this was a watershed event.
The market reopened on Monday, and investors had largely shrugged off the prior week's plunge, with one of the heaviest trading days on record.
Stock Market Crashes by Time of Year
Stock market crashes don't follow a predictable seasonal pattern, but some months are more prone to downturns than others.
October has been a surprisingly good month for stocks, with no major crashes occurring in the last 20 years.
On the other hand, September has had more historical down markets than October, making it a month to be cautious about.
Statistically, the perceived "October effect" is a myth, as crashes like the Wall Street Crash of 1929 and Black Monday have actually occurred in different months.
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Timing of Stock Market Crashes
October has been one of the best months for stocks over the last 20 years, which contradicts the popular notion of the October effect.
Statistically, September actually has more historical down markets than October.
Crashes like the Wall Street Crash of 1929 and Black Monday did occur in October, but this isn't a reliable indicator of future market trends.
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