Thursday was the 30th anniversary of one of the more frightening single trading days in modern Wall Street history: Black Monday, Oct. 19, 1987.

What would that day's 22 percent market crash look like today?

The Dow Jones industrial average this week crested a new height of 23,000. To lose an equivalent 22 percent, the Dow would have to drop more than 5,000 points  — 5,060, to be exact.

On Black Monday, the Dow fell 508 points. And that loss came on the heels of losses on three prior trading days, so that over four down days the Dow tumbled a total of 769.42 points, or 30.7 percent, according to Dan Wiener, founder of the Independent Adviser for Vanguard Investors.

"Imagine losing almost one-third of your portfolio in just four days," Wiener said.

Today, of course, with the Dow at 23,000, a loss of 769.42 points would register as a mere 3.4 percent drop.

A 30 percent drop? Let's call that an estimated 7,000 Dow points.

"That's really scary. And with valuations far from cheap, it's no wonder that the loudest cries on television and radio these days are from those forecasting some form of bear market cataclysm," Wiener said.

These days, however, the conditions just don't exist for a one-day crash like that, said Ed Clissold, chief U.S. strategist with Ned Davis Research Inc.

"Yes, a drop like that sounds dramatic. But the market has a lot more breadth now, interest rates aren't rising like they were in 1987, and there are stock exchange circuit-breakers in place to make sure that type of one-day market drop doesn't happen," Clissold said.

Breadth means more stocks advancing than declining. The Dow closed up again Thursday, gaining 5.44 points to 23,163.04

Conditions just aren’t ripe for a 1987-style crash, with better breadth in the market — meaning more stocks advancing than declining (Credit: Ned Davis Research).
Ned Davis Research
Conditions just aren’t ripe for a 1987-style crash, with better breadth in the market — meaning more stocks advancing than declining (Credit: Ned Davis Research).

For market-history buffs, the next biggest single-day drop after 1987's Black Monday was that famous crash back in 1929, which totaled 12.8 percent and heralded the Great Depression. The eighth largest drop, with circuit-breakers in place, was on Oct. 15, 2008, that one-day plunge of 7.9 percent around the time of the Lehman Bros. bankruptcy, Clissold added. (Technically, the Great Recession had already begun the previous December.)

The excessive optimism of 1987 was evident not only in equity valuations, but also in the belief that advances in computer technology could prevent portfolio losses, Clissold added.

But as the market declined, those "portfolio insurance" hedges failed to provide any protection at all — the computers set off sell orders automatically, according to Ned Davis Research issued this month.

What about October 2017's spooky low volatility? Currently the VIX, a widely watched fear index, is hovering around historical lows of 10.

The only comparable periods were in the early 1950s and mid-1960s, Clissold said: "VIX trading data only started in 1990, but if we use the absolute value of the rate of change in the S&P 500, we can see there were a few very low-volatility periods in the market" besides today.

So what's different now? The Federal Reserve is more market-friendly, interest rates aren't rising as quickly, and "the 1987 crash had been building; it didn't come out of the blue."

"Never say never," Clissold said, "but the warning signs aren't there today."