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Opinion
John Steele Gordon

How the Dow Distorts the History of Wall Street: Echoes

On Nov. 23, 1954, the Dow Jones Industrial Average, after 25 long years, finally surpassed the high it had hit on Sept. 3, 1929. It remains, by far, the longest period between new highs on the Dow in the 115-year history of the index. And the story behind that long recovery tells us a lot about how statistics can distort our view of the past.

The day after the Dow reached its high of 381.17 in 1929, the market suddenly tumbled in the afternoon, with an unheard-of 2 million shares changing hands in the last hour of trading. For the next six weeks, the index trended downward until, on Oct. 24, it collapsed on extraordinary trading volume. A group of bankers intervened with $20 million in buy orders and stabilized the market.