UK stock prices up 223% since 1987 stockmarket crash

19th October 2007 marks the 20th anniversary of 'Black Monday', the day world stockmarkets crashed.

In a single day, the FTSE 100 share Index plummeted by 11%, wiping billion of pounds from the London stockmarket. Halifax Financial Services examines how the stockmarkets around the world have performed since Black Monday.

New research from Halifax Financial Services shows that UK stock prices are, on average, currently more than three times (223%) higher than on Black Monday (19th October 1987). On Black Monday the FTSE Index fell from 2302 to 2052 – a fall of 11%.

UK stockmarket took two years to recover from 1987 crash

Global stockmarkets differed in recovery time following the 1987 crash.The FTSE 100 Share Index took just under two years to recover their pre-Black Monday levels whilst the Dow Jones Industrial Average took just over one year. The Hong Kong market took 3.5 years to recover to its pre Black Monday level and the Australian stockmarket took just over six years.

The global stockmarket performed very well in the run-up to Black Monday:

The FTSE 100 rose by 37% in 1987 up until Black Monday. This followed a 19% UK stock price increase in 1986.

The Dow Jones Industrial Average rose by 19% in 1987 up to Black Monday, preceded by a 23% increase in 1986.

The Hang Seng share index in Hong Kong experienced the strongest gains pre-Black Monday, rising by 47% in 1987 up until Oct 19th, following a similar rate of growth in 1986.

On Black Monday, stockmarkets across the world collapsed:

The Dow Jones Industrial Average dropped by 23% on October 19th and led global stockmarkets lower.

The FTSE 100 Share Indexexperienced a one day drop of 11% on October 19th, followed by a 12% fall the next day (reflecting the fall in the US market after the UK stockmarket closed on October 19th).

The Australian stockmarket suffered more with the All Ordinaries Index down 25% on October 20th in reaction to the falls on Wall Street.

UK took longer to recover from dotcom fall-out

Stockmarkets hit new highs during the dotcom boom with the FTSE 100 Index rising by 114% between 1995 and 2000. Much of this rise, however, was lost over the following two years as the dotcom bubble burst. Following the peak in the dotcom boom in March 2000 and the subsequent market falls, it took the FTSE 100 until May 2007 (seven years) to recover to its March 2000 position. This was longer than the UK stockmarket took to recover from Black Monday.

Recent market volatility modest compared to 1987 crash

The UK stockmarket has performed much better during the recent financial market crisis than in 1987. The UK stockmarket fell by 31% peak to trough in the aftermath of Black Monday, compared to an increase of 7% so far in 2007. The largest single daily fall in the FTSE 100 during 1987 was a 12% drop on 20th Oct 1987, nearly three times greater than the biggest daily price fall of 4.1% for the UK stockmarket during 2007, on 16th August 2007.

Martin Ellis, chief economist at Halifax Financial Services, said: "While the 1987 stockmarket crash was clearly one of the major events for financial markets and economies during the twentieth century, the strong long term performance of the UK stockmarket since then should not be surprising. The UK economy is in the midst of the longest unbroken period of economic growth on record and London's position as one of the world's major financial centres also makes it an important destination for global capital flows."