Did you know that the Great Depression of 1929, which we now know as the Great Depression, is taught to students in economics schools to avoid a repeat of Wall Street’s Black Tuesday?
The Great Depression struck on October 29, 1929, but let’s take a step back, What was Wall Street like before this date??
In the period leading up to the shock of the Great Depression, Wall Street firms experienced extraordinary success. Unemployment fell sharply, cars invaded America, everyone owned them, and job opportunities increased dramatically.
In the 1920s in America, stock trading was a must for any American who wanted to get rich. Traders would borrow money to trade because you mightn’t miss the upswing!
Economic growth created an environment where people loved to speculate on stocks almost as a hobby, with the general population wanting to get a share in the market. Many were buying stocks on margin—the practice of buying an asset in which the buyer pays only a small percentage of the asset’s value and borrows the rest from a bank or broker. Margin credit rose from 12% of the NYSE market value in 1917 to 20% in 1929.
The percentage increase at one time compared to the last bottom it saw reached 465.61%. In the period from 1921 to 1929, i.e. in just 8 years, the Dow Jones Industrial Average rose from levels of 70 as the value of the index shares to 380 as the value of the index shares, an increase of 465.6%.
But what is remarkable regarding the 465.6% increase?
Yes, you thought right, that’s the same percentage that the Dow Jones has risen since 2011! The Dow Jones hit its lowest point of the new century in 2009 when it was close to 7,000 points, but since then it has been rising to its current high of 32,768.49 points, up by 465.03%.
Of course, markets experience many pullbacks during this long cycle, but the current peak comes in a year that has been one of the strongest for Wall Street, and in which the major indices have experienced many peaks in the middle of the first year.
The bears have largely disappeared from the market, and the voices of analysts talking regarding the decline have also faded, and they no longer come as expectations that readers ignore, because they are expectations that began a long time ago and the market succeeded in overcoming them every time.
In this article, we open the door for you to share your opinions on whether the biggest correction is coming and the tragedy of the Great Depression will be repeated and there will be a “black” day on Wall Street in 2024, or will the rise continue strongly?
Do you believe in the rise or fear the collapse? Well in any case, you have to take shelter in global data, forecasts and news to be on top of the winners or survivors in value stocks!
Use Investing Pro and invest right! Now with an exclusive discount! Subscribe here for less than 31 SAR per month and get a discount of up to 50% on your plan for one year! At half price! (Click here and subscribe at the lowest price with the discount code SAPRO2)
Discover the best undervalued stocks in your local or global market based on InvestingPro’s fair value metrics. Our curated list highlights stocks that are trading below their true value, offering potential investment opportunities.
Stock Picks Using Fair Value from InvestingPro
Fair Value from InvestingPro shows the “true value” of a stock calculated using advanced financial models. These models predict the potential price of a stock in the market by looking at future cash flows, similar to the methods used by investment banks and equity research firms. The data on which these calculations are based comes from reliable sources such as S&P Global Market Intelligence, ensuring top-notch information.
Investing in undervalued stocks can be a great move for long-term growth and financial gain. These stocks have the potential to generate significant returns as the market eventually corrects its prices to reflect their true value. By picking stocks that are undervalued, investors can take advantage of times of market inefficiency.
Get ahead of the market with our top picks for undervalued stocks. Benefit from our in-depth analysis and make informed investment decisions to boost your portfolio performance.
What other services does InvestingPro offer to traders?
Know what to buy with ProPicks: AI-powered stock picks with a proven track record of outperforming .
Premium live data for over 200,000 instruments covering 250 global exchanges
Professional and exclusive breaking news providing important updates and elite-level analysis to keep you ahead of the market.
ProTips insights to simplify complex asset data into the simplest form and give you the bottom line instantly.
Fair value calculations that instantly reveal whether a stock is undervalued or overvalued using proven financial models.
Financial soundness score that assesses a company’s reliability based on historical data such as cash flow, profitability, etc.
How do you get all that?
Use Investing Pro and invest right! Now with an exclusive discount! Subscribe here for less than 31 SAR per month and get a discount of up to 50% on your plan for one year! Half price!
Wall Street’s Rollercoaster: Echoes of the Great Depression in 2024?
The Great Depression of 1929, a harrowing economic catastrophe etched in history, serves as a stark lesson for investors and economists alike. Its reverberations continue to echo through financial institutions, prompting a constant quest to understand and prevent a repeat of Wall Street’s “Black Tuesday.” While the current financial landscape differs significantly from the 1920s, parallels emerge, prompting speculation regarding potential risks and a possible repeat of history.
The Roaring Twenties: A Catalyst for Boom and Bust
The decade leading up to the Great Depression witnessed unparalleled economic growth. The American dream was alive and well, fuelled by a burgeoning industrial sector, widespread car ownership, and rapidly expanding job opportunities. This era of prosperity fostered a euphoric atmosphere where investing in stocks became a national pastime. The pursuit of wealth led many to engage in “margin buying,” leveraging borrowed funds to amplify their investments. This risky practice, however, sowed the seeds of an impending financial crisis.
The Dow Jones Climb: 1920s vs. 2011-2024
The Dow Jones Industrial Average (DJIA) soared during the 1920s, mirroring the bullish sentiment of the times. From 1921 to 1929, the index surged an astounding 465.6%, climbing from 70 points to 380 points. Interestingly, the DJIA has exhibited a remarkably similar percentage increase since 2011. After reaching a low of around 7,000 points in 2009, the index has rallied to an unprecedented peak of 32,768.49 points, representing a 465.03% rise. This uncanny resemblance has sparked numerous discussions and concerns regarding potential parallels with the Great Depression.
Unveiling the Similarities
The parallel growth of the DJIA in both periods serves as a compelling indicator but needs to be examined in the context of various factors:
- **Overvaluation:** Like the roaring twenties, the current market has witnessed an extended bull run, raising concerns regarding potential overvaluation in certain sectors.
- **Investor Sentiment:** The current investor landscape is characterized by a similar level of optimism and bullish sentiment, with a widespread belief in continued market growth. While optimism is essential for market growth, it can also lead to irrational exuberance and risky investment decisions.
- **Emerging Risks:** The global economic landscape is rife with uncertainties, including rising inflation, geopolitical tensions, and interest rate hikes, all of which might pose significant challenges to the current bull market.
While historical parallels are valuable for perspective, it’s crucial to acknowledge the fundamental differences between the 1920s and the present:
- **Regulatory Framework:** Financial regulations have evolved significantly since the Great Depression. The establishment of the Federal Reserve and institutions like the Securities and Exchange Commission (SEC) aim to provide oversight and stability to the financial system.
- **Diversification:** Modern investors have access to a diverse range of asset classes, including bonds, real estate, and commodities, allowing for greater portfolio diversification and risk management.
- **Technological Advancements:** Technological advancements have revolutionized the financial industry, offering sophisticated tools for data analysis, risk assessment, and portfolio management.
Navigating the Uncertain Future
The question of whether the current market will mirror the disastrous events of the Great Depression is a complex one, lacking a definitive answer. However, certain factors warrant cautious consideration:
- **Inflation**: Persistent inflation erodes purchasing power, leading to increased expenses and potential economic slowdown.
- **Interest Rate Hikes:** The Federal Reserve’s efforts to control inflation through interest rate hikes might curb economic growth and potentially trigger a market correction.
- **Geopolitical Tensions:** Escalating geopolitical tensions, including the ongoing Russia-Ukraine conflict, can create economic uncertainty and instability.
While it’s impossible to predict the future with certainty, investors are advised to adopt a prudent and balanced approach:
- **Diversify Investments:** Diversifying investments across different asset classes and sectors reduces overall portfolio risk.
- **Maintain a Long-Term Perspective:** Focus on long-term investment goals and avoid knee-jerk reactions based on short-term market fluctuations.
- **Stay Informed:** Keep abreast of global events, economic indicators, and market trends to make informed investment decisions.
InvestingPro: Your Guide to Informed Decisions
With an ever-changing market landscape, investors need reliable resources and tools to navigate the complexities of investing. InvestingPro, a comprehensive platform designed to empower investors with insightful data and analyses, offers an unparalleled advantage. Here’s how InvestingPro helps you thrive in today’s market:
InvestingPro’s Key Features:
- ProPicks: AI-powered stock picks with a remarkable track record of outperformance.
- **Premium Live Data:** Access live data for over 200,000 instruments across 250 global exchanges.
- **Breaking News & Analysis:** Stay ahead of the curve with professional and exclusive breaking news updates and insightful analysis.
- **ProTips Insights:** Gain clarity on complex financial data, instantly understanding the crucial takeaways.
- **Fair Value Calculations:** Identify undervalued and overvalued stocks using advanced financial models to make informed investment choices.
- **Financial Soundness Score:** Assess the reliability of a company based on financial metrics, including cash flow and profitability.
**Unlock the power of InvestingPro today, and take control of your financial future! Subscribe now and enjoy an exclusive discount of up to 50% on your yearly plan. Click here to secure your subscription and start making smarter investment decisions.**
The Bottom Line
The past serves as a valuable teacher, reminding us that market cycles are inevitable. While parallels between the 1920s and the current era exist, they are not necessarily a harbinger of doom. By staying informed, managing risks prudently, and utilizing tools like InvestingPro, investors can navigate the market’s fluctuations with greater confidence and achieve their long-term financial goals.