On Monday, October 18th 1987, the Dow Jones Industrial Average lost 508 points (22%). There are many theories as to why the crash occurred, but the simple truth is that the panic stemmed from a sharp rise in interest rates.
Likewise, another stock market crash awaits investors on the other side of tapering.
Rising interest rates 26 years ago were a direct result of surging inflation. The year 1987 started out with very benign inflation. Consumer Price Inflation in January of that year showed that prices were up just 1.4% from the year ago period. However, CPI inflation surged to an annual increase of 4.4% by October.
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