How Black Monday Gave Way to CD Replacement Month

October 19th will mark the 32nd anniversary of a day that many would sooner forget; Black Monday. One of the most significant events in market history, the 1987 stock market crash left not only the American economy reeling but left a global impact that can still be felt today.

So, what happened on Black Monday? Well, for one, the Dow Jones Industrial Average fell a staggering 22.61%, the index’s largest percentage drop, a record that still stands today. The damage was widespread. The impact reached beyond specific sectors of the market and left lasting effects on the entire economy. This is why Black Monday is sometimes referred to as the first modern crash.

There are many proposed causes—program trading, overvaluation, illiquidity, market fears about inflation, interest rates and more. Many at the time thought Black Monday was a precursor to another Great Crash. Markets did eventually rebound, but there remained a great deal of volatility, culminating in aftershocks and mini-crashes, such as the Friday the 13th mini-crash (Oct. 13th, 1989).

How does this relate to Certificates of Deposits and the opportunity for you, the advisor? As markets dived in 1987, consumers withdrew their exposed investments and transferred their money into Certificates of Deposit. With guaranteed interest rates and FDIC backing, CDs seem like a safe place to place money and immunize against market volatility.

However, due to their low rate of return, CDs, do not hedge against inflation very well, when compared to other products, like certain annuities. This is especially true with long-term CDs that many consumers automatically renew out of habit. This means that some consumers may be losing real-world value that could be parlayed into another solution that works better against inflation and could provide lifetime income. Because six-month and twelve-month CDs are up for renewal, October and April are often referred to as CD replacement months.

Consider the impact of inflation during the time period between September 1987 (right before the crash) and September 2018. Using the Inflation Rate Calculator found on (which bases its tool from the CPI calculator published by the U.S. Bureau of Labor Statistics) the total inflation over this time span is 119.51%. This means that something that cost $10,000 in 1987 would have jumped to nearly $22,000 by this time last year. For your clients or prospects that are nearing retirement, this represents a significant loss of real value. Consider also that in the thirty years since Black Monday, average CD interest rates have, overall, decreased.

Obviously, every consumer presents a unique situation. For some, CDs may still meet their needs. Others may be unaware of other options. However, this means that October gives you a good opportunity for review, discussion, and product sales.

To help agents and advisors take advantage of these CD replacement opportunities, Legacy Financial Partners is offering a complimentary CD Replacement Kit. This comprehensive package includes a wealth of materials includes prospecting aids, charts, presentations, and sales strategies.  Click here to claim your copy.

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Ryan Ogle -

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