Black Monday stands as one of the most dramatic days in financial history—an event that sent shockwaves through global markets and changed the way we think about investing risk. While it happened decades ago, its lessons remain acutely relevant for Australians navigating today’s sharemarket volatility and economic uncertainty. Let’s take a closer look at what unfolded on Black Monday, why it happened, and how its lessons still shape financial decision-making in 2025.
What Happened on Black Monday?
On Monday, 19 October 1987, the Dow Jones Industrial Average plunged by 22.6%—the largest single-day percentage drop in US stock market history. Australian markets weren’t spared: the ASX shed more than 25% in a single day, wiping out years of gains. The panic was global, with investors across Tokyo, London, Hong Kong and Sydney all caught in the downdraft.
- Speed and scale: In today’s terms, this would be like the ASX 200 losing over 1,700 points in a single session.
- Market contagion: Selling began in the US but quickly spread worldwide as investors scrambled to cut losses.
- Australian impact: Many local superannuation funds and retail investors saw major setbacks—some took years to recover.
By week’s end, nearly $1.7 trillion had been erased from global equity markets. The causes were complex, but the aftermath forced a rethink of how markets, technology, and psychology interact during a crisis.
Why Did Black Monday Happen?
Black Monday wasn’t triggered by a single event, but rather a toxic mix of economic, technological and psychological factors. Here’s what analysts and historians agree were the key drivers:
- Program trading: Computer-driven sell orders—then a new phenomenon—accelerated the downturn as algorithms automatically dumped shares in response to price falls.
- Valuation fears: Markets were already jittery about high share prices, rising interest rates, and concerns about economic growth in the US and globally.
- Panic and herd behaviour: Once the sell-off began, fear spread rapidly, with investors rushing to exit positions regardless of underlying fundamentals.
This cocktail of factors turned a routine correction into a rout. In Australia, the heavy reliance on the resources sector and global capital flows meant local shares were especially exposed to international sentiment swings.
How Black Monday Changed Investing—And Why It Still Matters in 2025
In the aftermath, regulators and market operators introduced sweeping changes to limit future damage. Here’s how Black Monday reshaped the landscape, and what Australian investors can take from it today:
- ‘Circuit breakers’: Market-wide trading halts were introduced to prevent panic selling. The ASX still uses these mechanisms in 2025, temporarily suspending trade when volatility exceeds set thresholds.
- Greater transparency: Regulators now require clearer disclosure of risks and tighter oversight of automated trading—vital as AI-driven strategies become more common.
- Diversification lessons: Black Monday showed that even diversified portfolios can experience sharp falls. In 2025, Australians are advised to spread investments not just across sectors, but also across asset classes and geographies.
- Behavioural insight: The crash underlined how fear and emotion can override logic in markets. Modern financial advice often focuses as much on investor psychology as on technical analysis.
Recent volatility—such as the 2020 COVID crash and the inflation-driven swings of 2022–2024—has echoed some themes of 1987. Yet, thanks to lessons learned, markets now have stronger guardrails and more resilient investor protections.
Black Monday’s Legacy: Navigating Uncertainty in Modern Markets
While no two crashes are identical, Black Monday remains a reference point for market resilience and investor behaviour. For Australians in 2025, its key takeaways include:
- Understand that sharp downturns can happen with little warning—and recovery can take time.
- Don’t rely solely on technology or trend-following; fundamental analysis and long-term planning matter.
- Keep emotions in check during market swings—panic selling can lock in losses and derail financial goals.
- Stay informed about regulatory changes and protections designed to cushion future shocks—such as the ASX’s updated trading halts, implemented after the 2023 review of market stability protocols.
Black Monday’s story isn’t just about loss—it’s about adaptation, reform, and the enduring value of investor education. Its echoes remind us that while markets change, the importance of preparation, discipline, and perspective remains constant.
