The shock is not unprecedented, nor is it expected to be short-lived. Global stock markets have indeed witnessed a carnage over the past few days, and its timing is too perfect to ignore. It would not be entirely wrong to say that this bloodbath marks the beginning of Black Monday 2.0.
US President Donald Trump, with his tariff announcement, unleashed bears onto global financial markets, who continued feasting on stocks for the third consecutive trading session on Monday. Every single stock exchange from the US to Europe and Asia tanked, not over conventional war or unexpected financial reports, but over tariffs. Then the algorithms and stop-loss settings did the rest.
At least $9.6 trillion has been wiped out from major stock exchanges worldwide. This is the first time such a coordinated bloodbath has been seen since the crash on October 19, 1987, dubbed Black Monday. Back then, markets collapsed within a day, wiping out over 22% on the Dow Jones, its worst single-day percentage drop in history. Portfolio insurance, which was a new financial tool at the time, automatically sold futures when markets dipped. However, when everyone did it at once, the system caved in under its own weight.
Although the triggers at that time were different, the mechanics were somewhat the same – automated trading and panic selling. Fast forward to the present, the disaster started off with a simple yet explosive policy that triggered panic, which has turned into a stampede. Since modern markets run on algorithms, automated systems took over once the selling started. Stop-loss orders and momentum-driven trades soon turned the expected dip into a nosedive, burning trillions of dollars in a matter of hours. However, unlike the 1987 disaster that took two years to recover, the current shock feels intentional, and might have far worse effects on economies.
Of course, a dead cat bounce could still be witnessed. However, expecting a total rebound would be naive, mainly because once confidence breaks, the game is no longer mathematical but psychological. Recovery from this crash is possible, but so is prolonged instability
The rumor mill is already churning, suggesting that the Trump administration wants to shift investor interest from equities to bonds, which are a safe haven as markets go south. As money flows into bonds, their prices go up and the return on investment usually goes down, along with inflation. However, assuming this strategy to work every single time is imprudent. Sustainability remains a major concern if inflation weighs.
The tariff gamble, regardless of the intentions behind it, has already hit every market linked to the dollar. Since this crash is built on trade wars, automation, and political games, the slowdown now looks inevitable. Of course, a dead cat bounce could still be witnessed. However, expecting a total rebound would be naive, mainly because once confidence breaks, the game is no longer mathematical but psychological. Recovery from this crash is possible, but so is prolonged instability. Either way, the illusion of control is gone.
