Can history repeat itself? Or, IS it repeating itself? Specifically, is October 2025 setting up to be the “new” 1987? Every day the similarities become stronger. Since the infamous crash of 1987 happened over 35 years ago, many investors (and fund managers) may not have a clue about what the ’87 crash was. And, may be again.
Having been actively engaged with a couple of hedge funds I managed “way back then,” today’s market similarities have triggered a flashback. Actually a real good flashback. Being short in a massive down move is a pleasure everyone should experience. Ahhhh, yes. Fantasizing about coming back in history with retained knowledge, I always choose 1987. But, 2025 may be a “do over.”
Just as the stock market today seems impervious to anything resembling bearish thoughts or ideas, the market acted the same way back in ’87. All summer, stocks marched upward almost every day, slowly hitting new highs in all the averages. There was nothing to worry about back then. Just as today, potential bad news (tariffs, war, inflation, etc.) is shrugged off. A little dip here, a little dip there—and then on to new highs. The marches continued for months.
On and on, stocks marched higher all summer and into September. In ’87, the upward trend created a strong mood of complacency—and even if something did go wrong, investors could always buy portfolio insurance (puts). As with today, investors are extremely complacent, and IF things were to turn negative, surely the Fed (or Trump) would come to the rescue. The “Trump put” is the safety net.
Well October 1987 arrived and things changed……..rapidly. Stocks started sliding one Monday and kept sliding all week. Friday was a big down day, dip buyers gave up and Monday arrived. Investors, surveying the damage, decided to purchase that portfolio insurance (puts). Problem. EVERYONE wanted to buy puts. Chasing put offers only exacerbated the market selloff and…..ta da……stocks lost 25%. What couldn’t go wrong, went wrong. Certainly the Tuesday after “black Monday” did see the market recover, but a whole lot of investors couldn’t pay their American Express bill that month. Unless they were short. Ahhhh, yes.
So here we are today. The stock market continues reaching new highs, bad news is ignored, there’s nothing to be too concerned about—and why even think about hedging? The “Fed/Trump put” is always there. Right?
It’s almost August, summer is in full swing, football begins soon and the market is strong. All warm and fuzzy. Could 2025 really be the new 1987? That’s just crazy talk. Going back in time with retained knowledge may actually be happening. Just for the h*** of it, I’ll be short, come October.
Bill Taylor is the CEO and Chief Market Strategist at Digital Wealth News, offering expert insights on markets and asset classes. A proud Horned Frog and Texas Christian University grad, he played college basketball while there. With a strong finance background and passion for digital innovation, Bill shares thought leadership on market trends and portfolio strategy for our audience.
