The tremendous increase in stock market prices during the 1920s was largely based upon value. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. The market continued to soar during 1928 and much of 1929, with these twenty-five leading industrial stocks reaching the 452 point mark in early September 1929, almost doubling the stocks’ selling price in less than two years.
The Warren Buffett Indicator,” also known as the Total Market Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment. As you may see from the charts below, 200 pointsof crash down in 2 months in 1929, then 100 points up for the next 5 months (until May 1930) and then 2 years and 2 months (until July 1932) down to the $40 level.
What made Black Thursday such a bad day in the history of the New York Stock Exchange was the loss of people’s faith in Wall Street For more, see Timeline of the Great Depression. But President Hoover had other ideas, together with Federal Reserve policy board head Miller he decided to clamp down the share prices and bring the market down by keeping away banks to extending loans that would be used buy stocks. Our most robust finding is that cross-sectional heterogeneity in expected returns, an indicator of the amount of disagreement, increased substantially with the stock market crash. Most of these stock market crashes are occurring in nations that are known as emerging markets”.
The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. If the market were to completely collapse, like in 1931, something resembling the second banking crisis must occur.
The third time was November 6, 2007, with the S&P 500 at 1,520.27. Over the following 16 months, the S&P 500 declined 55.5% to 676.53 – its largest medium-term percentage decline since the Great Depression. The stock market has been doing well because it’s the only avenue investors can turn to.