30 Years Later, Is the New Reality Sustainable?

Thirty years ago today, US equity markets were rocked by the biggest one-day collapse in stocks, when on October 19, 1987, the Dow Jones Industrial Average fell 22%.

With suitable hindsight, investors and analysts now say the Black Monday crash of '87 was fueled by what was then called program trading, in which computers were keyed to buy or sell when stocks hit certain, predetermined levels.

Much more sophisticated today, computers do the bulk of all trading on Wall Street, using algorithms which accomplish much the same effect as old-fashioned limit orders.

The Dow and other indices have been soaring to fresh all-time highs on a near-daily basis and the fear is that what has fueled the rally of the past eight years is running close to empty.

Freshly-minted money from the world's central banks and stock buybacks from some of the most unstable and overpriced listed companies (see McDonald's (MCD), for instance) have driven stocks to unfathomable levels. A pullback is inevitable, the trick primarily laying in the timing of such an event.

For now, Wall Street wallows in its great, contrived success.

At the Close, Wednesday, October 18, 2017):
Dow: 23,157.60, +160.16 (+0.70%)
NASDAQ: 6,624.22, +0.56 (+0.01%)
S&P 500: 2,561.26, +1.90 (+0.07%)
NYSE Composite: 12,371.02, +21.05 (+0.17%)