Wednesday, October 23, 2024

Friday, October 11, 2024

WSJ: Financial Flashback -- The Crash of 1929

By SIMON CONSTABLE 

In 1929, Wall Street’s good times ended almost overnight as stocks began a

multiyear skid. The key day, Oct. 28, 1929, also known as Black Monday (a

moniker which then resurfaced to describe the crash of 1987), was the beginning

of a crash in which the Dow Jones Industrial Average fell 13% and 12% on back-to-

back days. The slide ended in July 1932 when the Dow had lost 89.2% of its value.

 

“People remember the crash of ’29 because they blame it for triggering the Great

Depression,” says Sam Stovall, chief investment strategist at financial analytics

company CFRA. That depression led to years of economic contraction, ultrahigh

unemployment and mass discontent. The Dow returned to its previous high in

late 1954.

 

Stovall says there were several reasons for the 1929 crash. First, in the 1920s

investors embraced buying shares with borrowed money, often as much as 90%

of the stock’s value. That was fine while the market rallied. But on Black Monday

that ended as investors dumped their holdings to pay back the debt. “Basically, a cascading effect emerged,” he says. Read more here.