Twenty-five years ago, a demoralised stock market was experiencing the most traumatic few days in its post-war history. A series of events, including a devastating storm in southern England, sent the Footsie into a tailspin. In those tumultuous days the blue-chip index crashed from 2,322 points, not all that far from its then peak, to 1,684.
What became known as Black Monday was followed by a slightly bigger decline on Tuesday. There was a dead cat bounce on Wednesday, then further falls.
Although I was stock market reporter for The Independent at the time, I missed the excitement. I was on holiday in the Canary Islands and not aware of the calamitous developments until the Footsie was already rocking perilously. I rarely listened to a radio when enjoying the autumnal sunshine, and in those days newspapers invariably arrived a day after publication. So it was not until Wednesday, around midday, that I became aware of the disastrous collapse.
Like the more recent banking horrors, the seeds of the 1987 crash were planted in the United States. On the preceding Thursday an unexpected transatlantic interest rate increase created a nervous reaction in New York. So on the Friday there could have been heavy selling in London. But the worst storm in living memory disrupted road and rail travel and deprived many of telephone links. To all intents and purposes, the stock market closed. When it reopened the following Monday heavy pent-up selling occurred. The City was unnerved by a New York record slump, and it was clear that US shares were set for a rough ride. In the event, the US follow-up reaction was so severe that it invited parallels with the crash of 1929.
When I returned to the office the following week, the City was still traumatised. It could hardly comprehend that a year that had started so encouragingly, not only for Britain but for most industrial nations, could produce so much despair. For the rest of 1987, shares milled around. The following year provided modest improvement, but then the stock market started to show its resilience, and shares moved ahead robustly. There were a few hiccups, but by the end of 1999 the stock market, spurred by the madcap internet boom, greeted the millennium with a still unbeaten closing peak of 6,930.
Nowadays, the crash of 1987 looks little more than an unnecessary stumble. But at the time it was a terrifying experience for those who had the misfortune to be involved.
I suppose the slump from the 1999 peak as the internet bubble evaporated and the terrorist attacks occurred in New York was even more costly. By 2003 the stock market had lost almost half its value, with the Footsie crashing below 4,000 points.
The banking crisis – still with us – was another disaster that pushed the index below 4,000 points.
But although this century's falls were more severe than 1987's, the dramatic plunge from economic buoyancy early in the year to the horrors of October were the more nerve-racking. The stock market is not renowned for moving up – or down – in straight lines. Yet in those few days of 1987 it became within a whisker of achieving a dramatic, never repeated, straight line slump.
There is evidence that the old FT30 share index, in effect replaced by the Footsie in 1984, experienced some alarming falls, but the much broader Footsie measurement has, I believe, never suffered such acute embarrassment.
In these hi-tech days, conditions are rather different than back in 1987. After all the stock market was then still wrestling with the previous year's "big bang". And computer trading was in its infancy. But despite the slumps that have characterised equities over the years there remains the simple fact that shares, particularly most blue-chips, remain good long-term investments. As Lord Ritchie, once a Stock Exchange chairman, said during one post-war panic that is now lost in the midst of time: "Small investors should put their heads down and let the wind blow over them". He was right. Buy-and-hold shareholders have mostly enjoyed the satisfaction of being winners as equities are now more than three times the 1987 crash level.