S&P 500 · August 31, 1998
Russia's Default and LTCM
-6.80%
single-day change vs previous close
Part of a longer stretch
Russia's default and LTCM
near the end of it · 1998-07-17 → 1998-08-31, -19.34% over the whole period
What happened that day?
- 31 August 1998 — S&P 500 fell 6.8%, just after Russia suspended payment on its bonds and devalued the rouble
- What shocked markets was that this was debt issued in Russia's own currency. A government that can print the currency rarely refuses to pay in it
- The larger problem came next: a hedge fund called Long-Term Capital Management had bet heavily against this scenario and collapsed
- Its partners included Nobel laureates in economics, and it ran sophisticated models
- What those models classified as near-impossible had actually happened
- Fell 19.34% from peak. With the Fed brokering a rescue, markets stabilised comparatively quickly
Sources
Every figure on this page is recomputed from the original daily closing prices and checked against them at build time. The account of what happened is written from the sources listed above.