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Gallup Vault: No Clear Reason Seen for 1987 Stock Market Crash

Gallup Vault: No Clear Reason Seen for 1987 Stock Market Crash

The stock market crash of Monday, October 19, 1987, was a whopper in percentage terms -- shedding nearly 23% of stock values in a single day. To put that in context, the next-biggest drop was a 13% decline in 1929, setting off the Great Depression. A few days after the 1987 crash, Gallup found Americans split in their beliefs about why the plunge had occurred, with their answers scattered across six possible reasons.

Americans Not Clear on Reasons for 1987 Stock Market Crash
From what you have heard or read, which one of the following factors do you think had most to do with causing the big (stock) market drop?
U.S. adults
%
Overly optimistic investors 19
Reagan's handling of the big budget and trade deficits 15
Computer trading programs on Wall Street 15
Tensions in the Persian Gulf 14
Congressional handling of the big budget and trade deficits 12
Foreign economic policies 10
None (vol.) 14
Don't know 2
(vol.) = volunteered response
Gallup/Newsweek, Oct. 22-23, 1987

Today, automated computer trading programs that caused stock sales to cascade as ever-lower sell points were triggered are largely seen as the culprit for the 1987 crash. At the time, however, just 15% of Americans chose this as the principal reason among six offered to them in a Gallup/Newsweek poll.

Slightly more Americans in 1987, 19%, thought that overly optimistic investors were at fault -- presumably for artificially driving up market prices before the crash. In fact, there may have been some truth to this, given the extent of market exuberance earlier in the year.

According to the Federal Reserve:

Stock markets raced upward during the first half of 1987. By late August, the [Dow Jones industrial average] had gained 44% in a matter of seven months, stoking concerns of an asset bubble. In mid-October, a storm cloud of news reports undermined investor confidence and led to additional volatility in markets. The federal government disclosed a larger-than-expected trade deficit and the dollar fell in value. The markets began to unravel, foreshadowing the record losses that would develop a week later.

Meanwhile, 15% thought President Ronald Reagan's handling of the budget and trade deficits was to blame and 12% cited congressional mishandling of these issues, making the budget explanation the most dominant. Another 10% blamed "foreign economic policies."

Separately, 14% perceived that tensions in the Persian Gulf led to the selloff -- perhaps out of fear that war was imminent. This was a consideration because the U.S. had launched an airstrike against two Iranian oil production facilities in the Gulf on the morning of the crash, in retaliation for an Iranian attack on a U.S.-flagged oil tanker in the Gulf the previous week.

As for the effects of the 1987 stock market crash on Americans, most U.S. adults didn't seem highly concerned. Asked whether various groups would be "especially hard hit" by the recent market events, 51% thought this applied to wealthy people, 42% thought it applied to poor people and 27% to "people like yourself."

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