Cramer's Dire Warning: 1987 - Style Black Monday Looms Again as Trump Tariffs Roil Markets
3min read CNBC host and veteran market commentator Jim Cramer has sounded a dire alarm, cautioning that President Donald Trump's aggressive tariff policies could plunge the stock market into a crash reminiscent of the infamous "Black Monday" of 1987.
As markets reel from the immediate fallout of these trade measures, Cramer's warning draws on both current data and historical precedent, urging swift action to avert disaster.
Ask Aime: Could Trump's tariff policies trigger a stock market crash like "Black Monday"?
Cramer's Warning
Jim Cramer has explicitly warned that the U.S. stock market could be on the brink of a collapse similar to the one experienced on October 19, 1987—known as Black Monday—when the Dow Jones Industrial Average plummeted 22.6% in a single day.
He ties this potential catastrophe to Trump's recent tariff announcements, stating, "If the president doesn't try to reach out and reward these countries and companies that play by the rules, then the 1987 scenario... the one where we went down three days and then down 22% on Monday, has the most cogency." Cramer emphasized the urgency, adding, "We will not have to wait too long to know. We will know it by Monday."
Cramer's concern hinges on the market's vulnerability amid escalating trade tensions. He reflected on his personal experience during the 1987 crash, noting, "I lived through '87 and in the end, I came out okay. I was in cash for the crash. I know what this feels like." His blunt tone underscores a fear that history could repeat itself if current policies persist unchecked.
Cramer's warning is driven by Trump's tariff rollout and its immediate market impact.
On April 2, Trump announced a 10% blanket tariff on all imports with steeper levies set to take effect on April 9, 34% on China and 26% on India. China retaliated with its own tariffs, heightening fears of a global trade war. Cramer argues that this aggressive stance disrupts the global economic order, stating, "It's tough to build a new, weaker, world order on the fly." He sees no evidence yet to dismiss the possibility of a 1987-style crash, warning, "Frantically trying to do it but don't see anything yet that takes the October '87 scenario off the table."
The market's reaction reinforces his fears. Following the tariff news:
The Dow Jones Industrial Average plunged 2,231 points on Friday, after dropping 1,679 point son Thursday, marking the worst two-day slide since the early COVID-19 pandemic. The Nasdaq fell 962.82 points (5.8%). The S&P 500 dropped 322.44 points (5.97%).
These steep declines signal investor panic, reminiscent of the lead-up to Black Monday. Cramer noted that early attempts to buy the dip failed, saying, "Those who bottom-fished are sleeping with the fishes... so far." He draws a parallel to 1987, when a combination of high valuations, geopolitical tensions, and structural market flaws triggered a rapid, algorithm-driven sell-off. Today, he fears that trade disruptions could similarly destabilize an already fragile market.
However, Cramer offered a glimmer of hope, pointing to a strong employment report as a potential buffer. He suggested, "It makes it less likely a crash will necessarily lead to a recession." Still, his overriding message is one of caution: without a policy shift to ease trade tensions, the market remains at risk.
What Happened During the 1987 Black Monday?
On October 19, 1987, the world witnessed Black Monday, the largest one-day stock market decline in history. The DJIA crashed by 508 points, a staggering 22.6% drop, erasing billions in market value in hours. This wasn't an isolated U.S. event—stock markets globally plummeted, with New Zealand's market falling a catastrophic 60%, highlighting the newly recognized interconnectedness of financial systems.
The crash followed a euphoric market run. By late August 1987, the DJIA had surged 44% in seven months, sparking fears of an asset bubble. By mid-October, storm clouds gathered: A larger-than-expected U.S. trade deficit and a falling dollar rattled investors. On October 16, the DJIA lost 4.6% amid "triple witching"—the simultaneous expiration of options and futures contracts—amplifying volatility.
When trading opened on Monday, Asian markets collapsed, triggering a cascade of sell orders. In the U.S., the DJIA crashed at the opening bell, exacerbated by portfolio insurance—a strategy using options and derivatives that accelerated selling as losses mounted. Structural flaws, like inconsistent trade-clearing timelines and the absence of trading halts, fueled the chaos.
The Federal Reserve, led by Chairman Alan Greenspan, acted swiftly on October 20, affirming its role as a "source of liquidity" and encouraging banks to lend. This stabilized the system, preventing a broader economic crisis. Regulators introduced reforms, both circuit breakers to pause trading during sharp declines and standardized trade-clearing protocols to prevent forced liquidations.
Remarkably, the market rebounded quickly, regaining 288 points (57% of losses) in two sessions and surpassing pre-crash highs within two years. Black Monday exposed the risks of globalization and technology-driven trading—lessons that echo in Cramer's current warning.
