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#USStocks1988: What scared you just now, the bull market is still there ## After the stock market crash, U.S.

2026-07-27·x-repost-20260727-164505

#USStocks1988: What scared you just now, the bull market is still there ## After the stock market crash, U.S. stocks returned to low valuations Before the "Black Monday" stock market crash in 1987, the PE of the Dow Jones Industrial Average was about 23 times, and the median PE of the entire US stock market reached 38 times.

After the stock market crash, the Dow Jones Industrial Average hit about 12 times, nearly halved. In 1988, the U.S. economy was still experiencing strong growth, with GDP remaining above 4% and the unemployment rate falling below 5.5%, the lowest level since 1974.

Of course, At the same time, Hong Kong was "fishing for rice with fish bones", and at this time, the Japanese began to arrogantly scan the world for goods, and they were all equally prosperous. The Americans are certainly not bad. It can be said that they are in another golden period after the war.

The above almost benefits from The continued low oil prices, the efficiency improvements brought about by the privatization and clear property rights promoted by Thatcher and Reagan, and the complementary economic growth brought about by globalization.

## Americans’ Troubles: Currency Value and Deficit But Americans also have troubles: Since the Plaza Accord in 1985, the U.S. dollar exchange rate has been in decline, and the Louvre Agreement in 1987 has been unable to increase the value of the U.S. dollar even if it tried to increase it. The U.S.

dollar index was still in a downturn in 1988 (it only bottomed out in 1995). The pressure for Americans to maintain or even increase the value of the U.S. dollar comes from the growing trade deficit. Readers may be wondering, isn't devaluation conducive to exports and balancing the trade deficit?

Yes, with the passage of time, since the devaluation in 1985, the trade deficit balance was only slightly effective in 1989-1990, and in 1987, As the U.S. dollar itself depreciated, the prices of imported goods rose, and the amount of imports expanded rapidly, which once led to a further expansion of the trade deficit.

And The root cause of the trade deficit is the imbalance of U.S. industries and the loss of global competitiveness of U.S. products. This is what Americans are really worried about. In terms of inflation, the depreciation of the US dollar brought about an increase in domestic commodity prices.

Coupled with the doubling of oil prices in 1987, the entire economy was in a period of prosperity. Inflation rose rapidly, from 1.9% in 1986 to 3.7% in 1987, to 4.1% in 1988, and to 4.8% in 1989. ## The Fed is still determined to raise interest rates Therefore, based on the above, the Federal Reserve is eager to raise interest rates.

In 1987, the Federal Reserve officially started the interest rate hike cycle from around 5.9%, and by the time of the stock market crash, it had increased to 7.3%. Inevitably, this round of interest rate hikes was also one of the factors that led to the stock market crash at the time of high valuations.

In order to save the market, the Federal Reserve was forced to interrupt the process of raising interest rates and cut interest rates three times in a row after the stock market crash. As a result, the Federal Reserve took a look and realized that the stock market crash was over in a week, and that’s it?

Therefore, the interest rate has been cut three times, but in fact it has only been reduced by about 1%. In March 1988, seeing that the situation was stable, the Federal Reserve resumed raising interest rates until May. It raised interest rates 10 times in a row, raising the interest rate to 9.8%. Reached the peak of this round of interest rate hikes.

This round of interest rate hikes was Paul Volcker's last brilliant move. It provided enough ammunition for the subsequent crisis resolution in the 1990s and 2000s, and gave Greenspan, his successor, a good starting position. ## Profits are running fast In 1987, the profit growth rate of listed companies was at a low level.

Starting from the second half of the year, the profit growth rate began to accelerate. In 1987, the profit growth rate of non-financial enterprises reached 24%. It continued to grow in 1988, with a profit growth rate of 12%. By the end of 1988, the total profits of U.S.

listed companies were 1.72 times that of 1985, with an actual annualized growth rate of 18%. First of all, the first reason comes from the Reagan administration's timely implementation of the second round of large-scale tax cuts in 1987-88, which resulted in a substantial increase in corporate after-tax profits.

The second reason is similar to the current situation in 2026. AI has improved the production efficiency of all walks of life. By this point in 1988, the popularity of PCs had rapidly improved the production efficiency of almost all enterprises.

The third reason is that by this time, the United States began to completely transform from traditional manufacturing to commercial services. Major listed companies in the United States quickly climbed to the right side of the U-shaped curve, and their profit margins increased rapidly.

## The Dow Jones Industrial Average has continued to rebound in the past two years, completely filling the hole. Therefore, in the two years from the stock market crash in October 1987 to October 1989, the Dow showed a continuous upward trend, rising by a total of 74%. ## A century of experience and lessons from the U.S.

stock market 1️⃣This period is an interesting sample: despite a total of 16 interest rate hikes, the stock market has actually maintained a continuous upward trend. The key is still the core of the stock itself: profit growth and PE valuation.

At this stage, the compound growth rate of profits of listed companies is more than 18%, and after the stock market crash, the PE has fallen back to below 12 times, which is obviously an underestimated moment. 2️⃣At this stage, Americans still vaguely feel the imbalance of the U.S.

industrial structure, the trade deficit crisis, and the danger of dollar depreciation. However, the rise of the U.S. technology and high-end service industries has injected new productivity efficiency into the U.S. economy and stock market. In the past 40 years from 1987 to 20026, the Dow Jones Industrial Average has still risen nearly 30 times.

We have watched step by step as the United States went from full prosperity to partial decline, to partial resurgence, and then to full decline. This process happened in a rhythmic manner and did not happen in one fell swoop.

Full text

#USStocks1988: What scared you just now, the bull market is still there ## After the stock market crash, U.S.

#USStocks1988: What scared you just now, the bull market is still there ## After the stock market crash, U.S. stocks returned to low valuations Before the "Black Monday" stock market crash in 1987, the PE of the Dow Jones Industrial Average was about 23 times, and the median PE of the entire US stock market reached 38 times. After the stock market crash, the Dow Jones Industrial Average hit about 12 times, nearly halved. In 1988, the U.S. economy was still experiencing strong growth, with GDP remaining above 4% and the unemployment rate falling below 5.5%, the lowest level since 1974. Of course, At the same time, Hong Kong was "fishing for rice with fish bones", and at this time, the Japanese began to arrogantly scan the world for goods, and they were all equally prosperous. The Americans are certainly not bad. It can be said that they are in another golden period after the war. The above almost benefits from The continued low oil prices, the efficiency improvements brought about by the privatization and clear property rights promoted by Thatcher and Reagan, and the complementary economic growth brought about by globalization. ## Americans’ Troubles: Currency Value and Deficit But Americans also have troubles: Since the Plaza Accord in 1985, the U.S. dollar exchange rate has been in decline, and the Louvre Agreement in 1987 has been unable to increase the value of the U.S. dollar even if it tried to increase it. The U.S. dollar index was still in a downturn in 1988 (it only bottomed out in 1995). The pressure for Americans to maintain or even increase the value of the U.S. dollar comes from the growing trade deficit. Readers may be wondering, isn't devaluation conducive to exports and balancing the trade deficit? Yes, with the passage of time, since the devaluation in 1985, the trade deficit balance was only slightly effective in 1989-1990, and in 1987, As the U.S. dollar itself depreciated, the prices of imported goods rose, and the amount of imports expanded rapidly, which once led to a further expansion of the trade deficit. And The root cause of the trade deficit is the imbalance of U.S. industries and the loss of global competitiveness of U.S. products. This is what Americans are really worried about. In terms of inflation, the depreciation of the US dollar brought about an increase in domestic commodity prices. Coupled with the doubling of oil prices in 1987, the entire economy was in a period of prosperity. Inflation rose rapidly, from 1.9% in 1986 to 3.7% in 1987, to 4.1% in 1988, and to 4.8% in 1989. ## The Fed is still determined to raise interest rates Therefore, based on the above, the Federal Reserve is eager to raise interest rates. In 1987, the Federal Reserve officially started the interest rate hike cycle from around 5.9%, and by the time of the stock market crash, it had increased to 7.3%. Inevitably, this round of interest rate hikes was also one of the factors that led to the stock market crash at the time of high valuations. In order to save the market, the Federal Reserve was forced to interrupt the process of raising interest rates and cut interest rates three times in a row after the stock market crash. As a result, the Federal Reserve took a look and realized that the stock market crash was over in a week, and that’s it? Therefore, the interest rate has been cut three times, but in fact it has only been reduced by about 1%. In March 1988, seeing that the situation was stable, the Federal Reserve resumed raising interest rates until May. It raised interest rates 10 times in a row, raising the interest rate to 9.8%. Reached the peak of this round of interest rate hikes. This round of interest rate hikes was Paul Volcker's last brilliant move. It provided enough ammunition for the subsequent crisis resolution in the 1990s and 2000s, and gave Greenspan, his successor, a good starting position. ## Profits are running fast In 1987, the profit growth rate of listed companies was at a low level. Starting from the second half of the year, the profit growth rate began to accelerate. In 1987, the profit growth rate of non-financial enterprises reached 24%. It continued to grow in 1988, with a profit growth rate of 12%. By the end of 1988, the total profits of U.S. listed companies were 1.72 times that of 1985, with an actual annualized growth rate of 18%. First of all, the first reason comes from the Reagan administration's timely implementation of the second round of large-scale tax cuts in 1987-88, which resulted in a substantial increase in corporate after-tax profits. The second reason is similar to the current situation in 2026. AI has improved the production efficiency of all walks of life. By this point in 1988, the popularity of PCs had rapidly improved the production efficiency of almost all enterprises. The third reason is that by this time, the United States began to completely transform from traditional manufacturing to commercial services. Major listed companies in the United States quickly climbed to the right side of the U-shaped curve, and their profit margins increased rapidly. ## The Dow Jones Industrial Average has continued to rebound in the past two years, completely filling the hole. Therefore, in the two years from the stock market crash in October 1987 to October 1989, the Dow showed a continuous upward trend, rising by a total of 74%. ## A century of experience and lessons from the U.S. stock market 1️⃣This period is an interesting sample: despite a total of 16 interest rate hikes, the stock market has actually maintained a continuous upward trend. The key is still the core of the stock itself: profit growth and PE valuation. At this stage, the compound growth rate of profits of listed companies is more than 18%, and after the stock market crash, the PE has fallen back to below 12 times, which is obviously an underestimated moment. 2️⃣At this stage, Americans still vaguely feel the imbalance of the U.S. industrial structure, the trade deficit crisis, and the danger of dollar depreciation. However, the rise of the U.S. technology and high-end service industries has injected new productivity efficiency into the U.S. economy and stock market. In the past 40 years from 1987 to 20026, the Dow Jones Industrial Average has still risen nearly 30 times. We have watched step by step as the United States went from full prosperity to partial decline, to partial resurgence, and then to full decline. This process happened in a rhythmic manner and did not happen in one fell swoop.

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