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The Day the Market Went South
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12082 |
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Section : |
CURRENT ISSUES
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| Issue
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12 / 1987 |
2,388 Words |
| Author
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John H. Fund
John H. Fund is an editorial writer for the Wall Street
Journal. |
The morbid jokes began almost immediately. "What do you call a yuppie investment banker?" "Waiter." But for millions of investors, the stock market collapse of 1987 - the word crash, with its connotations of economic depression, was too harsh for many - was anything but a laughing matter.
The market's collapse spawned a boom in financial advice, many of it 180 degrees from the bull market optimism of a few weeks before. Booksellers are cashing in on sales of the book The Great Depression of 1990, by economist Ravi Batra. Financial newspapers are disappearing from newsstand racks, and some brokers, whose phones won't stop ringing, are even asking people on the street for their opinions.
As people recovered from the shock of the market's swift drop, the inevitable search for the cause of the decline began. Was it the growing perception that President Reagan was politically weakened? The twin trade and budget deficits? The result of exchange-rate instability? Pressures for higher taxes on corporate takeovers? The threat of a protectionist trade bill being passed by Congress?
Much has been written about the market's concern with the trade and budget deficits. This explanation is inadequate because both deficits had been around for some time, and the most recent evidence was that both were declining or likely to decline in the near future. President Reagan's political weakness was real enough, but it is unlikely to have been a major factor itself in the market decline. It is more likely that his lack of political clout worsened investor fears that unwanted tax and trade bills could become
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