A Ninety Percent Decline

From 1929 through 1932, the Dow Jones Industrial Average would lose nearly ninety percent of its value. In this four year period, there were several nasty bear market rallies, lifting the hopes of the hopeful, only to be met with tidal waves of selling.

bear rallies

Corporations were collapsing and individuals didn’t fare much better. Unemployment in the United States was 25% and U.S. GDP declined by 46%.

Lets take a look at the stock market during each of these four years to get a better sense of just how devastating the Great Depression was.

1929 Dow Jones Industrial Average -17.2%

1929

Stocks went sideways for the first six months of the year, and then exploded high through the summer, gaining 30% in just three months. Earnings were actually up 26% for the year, but it seems investors priced that in and then some. By the end of the summer, money-center banks were fetching 50x earnings and National City was trading at over 100x.

The rest is history.

From September through November, the Dow would collapse 48%. There was a 32% rebound towards the end of the year but the Industrials ended the year down 17.2%.

1930 Dow Jones Industrial Average -33.8%

1930

From November 1929 through April 1930, stocks rallied 48%.  April had the highest volume of any month since 1929 with the exception of October, which fooled some investors who thought the worst was behind them. The Dow then fell 23% over a three-week period in June. In October, stocks fell below their worst levels of 1929 and when the Bank of New York failed, the Dow lost 16% in 12 trading days.

1931 Dow Jones Industrial Average -52.7%

1931

Although people talk about the crash of 1929, 1931 was even more destructive. It remains the worst year on record as the Industrials lost 52.7%. The rails lost 65.2%, the worst yearly decline of any Dow Jones Average ever. Bank failures averaged 200 a month. Warner Brothers, one of the hottest stocks of the bull market, lost 98% of its value from 1930-1931. In September, the Dow lost 31%, its worst month ever.

1932 Dow Jones Industrial Average –23.1%

1932

“For bull and bear alike, 1932 was the most savage year in stock market history.” John Dennis Brown

Even after losing 17, 34 and 53% over the previous three years, in the four months from March 8 to July 8, the Dow lost 53.6% of its value! The most insane bear market rally of all time followed in the summer as the Dow Industrials gained 93% in just two months. Over this eight week period, Rails tripled and the Utilities doubled.

A respite finally arrived in 1933. The Dow had its only intra-year 100% advance, (February-July) and finished the year up 66.7%, its best year ever. However, the damage from the Great Depression was done and would leave lasting scars on an entire generation of investors. The Dow would not make new all-time highs until 1954.

Much of this information was pulled from 101 Years on Wall Street, by John Dennis Brown, which I highly recommend.

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