Stock Market History, 1920's, 1930's

July 8, 1932

On this date 87 years ago, the stock market FINALLY stopped falling.

July 8th, 1932, is a historically significant day in the USA's financial system. Bet you never heard of that.

It marked the day that the stock market fell to a low never to be evidenced since. 

Most remember the news of the 1929 stock market crash, which touched off the Great Depression. The crash affected all Western industrialized countries. If you are in mid-life or later, either your parents or grandparents experienced this dreary time for the USA first-hand. Ask them about that sometime. If you are young, Google it.


In 1929, the U.S. Economy had just ended a robust 21 month expansion; they called it the "Roaring 20's" if you look back further. The stock market, then represented almost entirely by the Dow Jones Industrial Average, ran from about 100 to 380 from 1922 to 1929.

The U.S.A. and Germany signed the peace treaty, Television was invented, Chrysler Motors founded, and Lindberg flew the Atlantic. Railroads were allowed to leave Government control. Insulin was isolated to treat diabetes. You could still get your booze at the speak-easy if you knew the right people since liquor was outlawed in 1920 for 13 years!

From it's high near 381 on the Dow Jones Industrials Average in 1928, the stock market FELL 89% in value to close at 41.22 on July 8th, 1932.


I'm certainly not predicting that same outcome in the future, but I am not ruling it out entirely. Prices for most things run on demand, fear and greed. We don't know catalyst nor the time of the next major event to unfold.

It would take 25 years for the 1928 stock market highs to be seen again, in late 1954. BUT ... there were HUGE rallies and give-backs during that time, so you had to watch your investments (if you had any money left) closely.

The Dow gained 370%, 128% and 222% in three big rallies during the 25 year span, but also fell to offset that, and ended near Dow 400 late 1954. Here's a chart of that 25 year span.

President Franklin Roosevelt proposed his "NEW DEAL" in 1933, making major changes to our financial system in the early 30's - forming the Securities and Exchange Commission, the Federal Deposit Insurance Corporation (FDIC), and the Social Security Administration, which today still exist and protect investors and workers. 

So you may ask, how much would my money have grown if I owned the Dow Jones Industrial Average at 41.22 in 1932.

Well students, the compound growth rate of that to today's Dow 27,000 is +7.75% per year. If you add the roughly 2% in dividends on the stock you collected, you get to +9.75%, very close to the long-term +10% average annual gain in the stock market often quoted - and a correct statistic.

Class dismissed!