Is This 1987 All Over Again? What’s Driving the Market Meltdown?
Past routs offer lessons after Black Monday Morning
4 min
Financial markets are supposed to capture the wisdom of the crowd, but on Monday the crowd ran in all directions waving its hands in the air screaming. Japan’s stock market fell the most in 37 years with a 12% plunge that wiped out all its gains for the year, while in the U.S. the VIX index of implied stock volatility briefly had its biggest rise ever. Panic hit.
The selloff was triggered by Friday’s jobs data prompting a sudden switch in the economic narrative from soft landing to hard landing. Add to the mix a period of deflating hype about artificial intelligence and a Bank of Japan rate rise designed to strengthen the yen. News that Warren Buffett’s Berkshire Hathaway had sold half its Apple shares and boosted its cash pile added to the pain.
But the triggers couldn’t possibly justify the scale of the moves. When a new trigger arrived, in the form of better-than-expected data on the service sector, markets partially rebounded and the Vix fell sharply — again, far more than the data could justify.
The selloff—which at one point had chip maker Nvidia down 15%—was so big because investors had been all-in betting that things would work out well. Now things have calmed a bit, the question is whether the unwind of these bets, and the leverage behind them, is done. If it resumes, will the selloff feed back into higher savings and a weaker economy or, worse, hit the financial system?
The extreme examples of past effects from big market falls are 1987’s crash, 1998’s Long-Term Capital Management blowup and 2008’s global financial crisis. History is never perfect, but so far this looks more like a (much milder) version of 1987 than it does the other two.
In 1987, the stock market had its biggest one-day fall ever, with the S&P 500 down more than 20% on Black Monday in October. Investors had built up excessive leverage after a stunning 39% gain in the year to August’s high, and the crash led both to big margin calls and to badly designed automated trading that exacerbated the selling. But the Federal Reserve poured liquidity into the banks, brokers didn’t default and the market made back all its losses within two years. The economy was fine.
The good news was that 1987 was all about markets: They went up, they went back down, no one else was hurt. The S&P made 36% in the eight months to its August 1987 peak, similar to the 33% it rose in the eight months to the end of June this year. As in 1987, this year’s gains came in spite of tight monetary policy and higher bond yields. Just like today, in 1987 investors were on edge and ready to sell to lock in the unexpected profit. The losses are smaller so far, but lucrative trades have reversed , just as they did for the market as a whole in 1987.
In 1998, the situation was much worse, although stocks recovered more quickly. Highly levered hedge fund LTCM was crushed when Russia’s domestic debt default created a flight to safety. LTCM was big enough that it threatened to bring down Wall Street institutions. The Fed cut rates three times and pulled together a group of banks to rescue the firm and wind down its trades slowly. Stocks took just four months to recover, but the easy money helped stoke the dotcom bubble, which popped two years later and led to a mild recession—and gigantic losses for investors in tech stocks.
We don’t know yet if any hedge funds have been taken out by the big moves in markets, which have brought heavy losses for those engaged in the “ carry trade ” of borrowing cheaply in yen and buying higher-yielding currencies such as the Mexican peso or dollar. Large swings in Treasurys on Monday might also have hurt, given the large positions hedge funds hold. Traders are betting that the Fed will slash rates, with a super-sized cut of 0.5 percentage points priced into futures for the September meeting (and far more earlier in the day).
The really bad outcome would be a repeat of 2008, but it seems highly unlikely. True, some large U.S. banks failed last year, due to bad bets on government bonds. But banks are much less leveraged than they were, and the system is less exposed to a liquidity crisis, as private lenders have taken on much of the risk that used to sit in banks. Big losses are entirely possible, and private funds could hit trouble, but that would take time and wouldn’t create the same system-wide crisis.
The ideal would be that excess in the stock market unwinds as in 1987 without creating wider trouble, hopefully more gradually than in 1987. AI enthusiasm could deflate stock prices much more—even after falling 30% from its June high, Nvidia has still doubled in price this year. But the market is already much closer to normal, with Monday’s falls leaving the Nasdaq 100 index up only 6% this year, and the S&P 7%.
If panic continues to abate, the Fed cuts and nothing breaks in the financial system, we should count ourselves lucky. But it would be good if investors could remember the sinking feeling they had on Monday morning, and try to be a bit wiser and less speculative.
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The lunar flyby would be the deepest humans have traveled in space in decades.
4 min
It’s go time for the highest-stakes mission at NASA in more than 50 years.
On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.
The launch window for Artemis II , as the mission is called, opens at 6:24 p.m. ET.
National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.
Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.
“I could have a very comfortable life for them,” Wiseman said in an interview last September.
“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”
Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.
What are the goals for Artemis II?
The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.
The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.
Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.
SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .
How is the mission expected to unfold?
Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.
The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.
After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.
Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.
Is it possible Artemis II will be delayed?
Yes.
For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.
Who are the astronauts flying on Artemis II?
The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.
Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.
Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.
Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.
What will the astronauts do during the flight?
The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.
Those efforts will play out in Orion’s crew module, which has about two minivans worth of living area.
On board, the astronauts will spend about 30 minutes a day exercising, using a device that allows them to do dead lifts, rowing and more. Sleep will come in eight-hour stretches in hammocks.
There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.
Each astronaut is permitted two flavored beverages a day, including coffee. The crew will hold one hourlong shared meal each day.
The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.
What happens after Artemis II?
Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.
NASA hopes that its contractors and the agency itself are ready to attempt one or more lunar landing missions in 2028. Many current and former spaceflight officials are skeptical that timeline is feasible.
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