Stock Traders Should Heed the Lessons of the 1930s
The economic outlook is not unlike the Great Depression years, and that didn’t turn out well for equities.
The stock market is fooling a lot of people these days.
Photographer: Drew Angerer/Getty Images North AmericaDon’t be fooled by the recent rebound in stocks; the investment scene is beginning to resemble the 1929 market crash and the early 1930s Great Depression.
In the Roaring ‘20s, the Dow Jones Industrial Average jumped 500% from August 1921 to September 1929. It then plunged 48% from Sept. 3 to Nov. 13, 1929. To many, that seemed like a reasonable correction of the 1920s exuberance. The economy was fully employed and growing rapidly and most looked forward to more expansion and higher stock prices. Only days before the crash, prominent economist Irving Fisher stated that “stock prices have reached what looks like a permanently high plateau” and the market was “only shaking out of the lunatic fringe.”