• Market Crumbs

It's Been 90 Years Since Black Tuesday, Could It Ever Happen Again?

Image via explorethearchive

90 years ago today, the world was waking up to newspaper headlines detailing the ongoing Wall Street Crash of 1929. The crash began the week before, on a day that has become known as "Black Thursday," but had subsided heading into the weekend as Wall Street bankers held a meeting and decided to buy stocks as a potential solution to the panic.

When markets opened on Monday, October 28, 1929, selling continued as people read over the weekend (because they didn't have internet back then) what was happening on Wall Street. The day became known as "Black Monday," with the Dow Jones Industrial Average dropping nearly 13%, which remains its second-largest daily percentage loss of all time. The following day, exactly 90 years ago today, the Dow Jones fell nearly 12%, which remains its third-largest daily percentage loss of all time. The day, which became known as, you guessed it, "Black Tuesday," saw so much selling that some stocks didn't even have a bid.

Following the two days of selling, financial giants such as the Rockefellers began buying stocks to instill confidence in the market. Following what, at the time, was its worst two days ever, the Dow Jones jumped more than 12%. The market didn't bottom until 1932 and didn't surpass the highs from 1929 for 25 years - until 1954.

The crash of 1929 is credited for marking the beginning of the 12-year Great Depression that would follow. The Great Depression would see U.S. industrial production fall by 47%, GDP fall by 30% and the unemployment rate top 20%. 20% of banks that existed in 1930 would go on to fail by 1933.

So now that we got the history lesson out of the way, why is any of this relevant? Besides being interesting, the S&P 500 hit its highest level in the history of the world yesterday. Although the Dow Jones didn't hit a new all-time high yesterday, it's still an interesting juxtaposition of where markets were then versus where they are now. The S&P 500, which wasn't founded until 1957, is now widely regarded as a better measure of the overall market anyway.

90 years ago today, the Dow Jones closed at 230.07. Yesterday, the Dow Jones closed at 27,090.72. We'd do a "If you invested $10,000 in the Dow in 1929" line here but the reality is anyone who had $10,000 to invest in 1929 likely isn't alive anymore so who cares.

So for those who are fortunate enough to benefit from the market at all-time highs, don't forget that 90 years ago proved it can all be lost fairly quickly. Who knows where we go from here, but if things do go south, fear not, because the Fed believes it has the right tools to fight a downturn and can use them "more quickly and more effectively" than previously.

Leftover Crumbs

  • That doesn't make much sense. Wells Fargo, the largest bank lender to the U.S. agriculture sector, has laid off at least 25% of the unit that specializes in agricultural lending. Despite President Trump saying farmers would need "more land" and "bigger tractors" as a result of the phase one trade deal, Wells Fargo apparently doesn't see the need for them. Bankers from the energy lending team were also part of the more than 200 bankers that were laid off.

  • How do you say HODL in Mandarin? Chinese President Xi Jinping has called for an increase in research and investment into blockchain technology. At a Politburo meeting last week, Xi said "Major countries are stepping up their efforts to plan the development of blockchain technology. Greater effort should be made to strengthen basic research and boost innovation capacity to help China gain an edge in the theoretical, innovative and industrial aspects of this emerging field." This comes just a few days after Facebook co-founder and CEO Mark Zuckerberg told Congress "China is moving quickly with the launch of a similar idea in the coming months" when testifying about Libra.

  • The protests are crippling Hong Kong. The protests that have taken over Hong Kong since the beginning of the year have officially sent the country into a recession. The city’s Financial Secretary said "The blow to our economy is comprehensive," and it will be "Extremely difficult for us to reach full-year economic growth of 0 to 1%." If that isn't bad enough, he added "I would not rule out the possibility that the full-year economic growth will be negative." Amid plummeting tourism, some shops in tourist districts have reported sales declines as high as 80%.

  • Will they use it to spy on employees? Shares of Fitbit soared more than 30% yesterday following a report Google parent Alphabet made an offer to acquire the company. Alphabet may be interested in acquiring Fitbit to expand into the wearable fitness tracking market which is currently dominated by Apple. Following yesterday's move, Fitbit's market capitalization is approximately $1.1 billion, well below the $10.7 billion it was valued at in 2015.

  • Cancel your Sunday plans. Popeye's has announced its chicken sandwich, which sold out nationwide last month, will be returning this Sunday. By bringing the chicken sandwich back on Sunday, the company is clearly taking a shot back at Chick-fil-A, which is infamously closed on Sundays. Hopefully Popeye's has secured enough supply to avoid another incident where customers attempt to storm the store with guns to get a sandwich.