On October 17, 1987, the stock market experienced the kind of crash that had become lore and largely thought to be a thing of the past. That day, the Dow Jones industrial Average tumbled from 2,246 to 1,738 (a decline of 22.6%) and entered history books as Black Monday. The crash was far more than the legendary Black Friday swoon of 12.8% that ushered in the Great Depression on October 28, 1929.

In October 1987, consumer sentiment measured by the University of Michigan stood at a reading of 89.3. It of course slipped, but by January 1999, was back to 90.8.

Fast forward to more current history and the great tech crash and subsequent disappointment continues to linger. The Dow and sentiment were at all-time highs in January 2000. Since then, the Dow has recovered and currently trades at 39.5% higher than the January 2000 peak, but sentiment is 22.9% below its high point.

Why was sentiment able to bounce back from the greatest one-day crash in history in just three months, but more than 14 years after peaking, sentiment trails?

For one thing, I think the sharpness of the crash was good in the sense it happened and recovery began just as quickly. I think political leadership and America’s place in the world were greater back then as well.

The good news is, sentiment is higher than the 2007 peak level, and hopefully it continues to rebound, but it does point to a disconnect that’s cost a lot of investors opportunities to earn back money lost and enjoy better fiscal health.

Ending on a Rally

By Dominique Paul, Research Analyst

The major indices are all in the green, so far, this afternoon. Though they still have long ways to go, seeing them continue to rise brings great comfort to observers who, earlier this week, thought we would continue seeing red for time to come. The Dow has recovered over 275 points having risen over 1.75% so far. The NASDAQ and S&P 500 are trailing right behind showing gains of 1.45% and 1.55%, respectively. The lift was primarily attributed to the better than expected earnings releases from key companies this morning, such as General Electric and Honeywell. There were also a few economic data releases that helped the market.

As noted in the morning report, housing starts and permits for the month of September were released. The housing report showed that housing statistics continue to be volatile as they rebounded from their drop in August following an impressive gain in July. The preliminary Michigan Consumer Sentiment for October was released later this morning, showing that consumers are more confident than we thought. The preliminary reading for the month came in at 86.4, significantly higher than the final September reading of 84.6 and consensus estimate of 84.4. Consumers found the improving labor market and lower gas prices quite encouraging. There will not be any more earnings or economic data releases for the remainder of the day to move the market, so we should be able to see the rally continue and markets close in the green.