Donohue Remembers Black Monday
J.P. Morgan Asset Management's Head of Liquidity John Donohue posted a blog entitled, "Remembering Black Monday." He writes, "On October 19, 1987, I was a 22 year old recent graduate, and four months into a thankless entry-level job on Wall Street. By the end of the day, now known as 'Black Monday,' the Dow had plunged 22.6% in what remains the biggest single-day stock market selloff on record. My memories of Black Monday are still fresh as we approach its 35th anniversary." He comments, "The chaos that followed the market crash eventually eased, but the lessons learned continue guiding me to this day as head of J.P. Morgan's Global Liquidity business. Black Monday was the first of many crises I've encountered over the past 35 years. Each serves as a reminder of how quickly markets can freeze up and how critical liquidity becomes at those times. As I look back over the decades, I also see the Fed following a nearly identical playbook during every major emergency. Their specific policies may vary, but the goal is always the same -- inject enough liquidity into the system to stabilize markets and reassure investors." Donohue explains, "Of course, they can also remove liquidity from markets -- a lesson I learned firsthand in 1994 on the money market trading desk. Back then, the Fed was aggressively raising interest rates to fight inflation, driving down stocks and bonds and leaving investors with nowhere to hide except cash. That exact same scenario is playing out again today, but an even more aggressive strategy has put us in truly uncharted territory." He adds, "History teaches that money market funds are hyper-sensitive to Fed policy. As liquidity crunches arise, we in Global Liquidity often feel the biggest impact because our clients need ready access to their cash. I'm always telling my team that cash is the most sacred asset people own in times of turmoil. We need to be good stewards of it. We need to be extra vigilant in protecting it. We need to be diversified and disciplined, yet ready to shift course quickly as conditions change. Some of the younger folks on our team are in their first jobs, just as I was on Black Monday. As someone who started out stuffing envelopes, I'm living proof that you never know where a career might lead. Do great work, no matter how menial, and the recognition and promotions will follow. Be open to any and all new job opportunities, but don't take them based only on short-term rewards because choices made now will affect careers later. Investors need that same long-term focus today. Markets are down, and we're seeing a lot of value across asset classes. Recovery may be months or even years away, but those who invest now will likely consider it one of their best financial decisions when looking back in another 20 or 30 years."
