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Quote of the Day
“Is it not entirely possible that conditions at present are so different from conditions in the past that the old standard of comparison is worthless?”
-William Biggs, in Forbes Magazine in 1927
On this day in 1927, the Dow would break the 200 milestone for the first time as the optimism (and perhaps naivety) flows to Wall Street. “This time is different” may have worked for a couple years, but the argument would not hold for long.
December 19th – This Day in Stock Market History
1927 -The Dow Jones Industrial Average closes above 200 for the first time. It has taken the Dow 21 years to go from 100 to 200 – a compounded annual growth rate of about 3.2% over that period of time.
The stock market was likely held back during most of the decade as the world recovered from World War 1 and battled a widespread flu pandemic. The unexciting growth of the stock market for the previous two decades would quickly liven up by the end of the 1920s though. From 1924 to 1929 the Dow Jones Industrial Average would set new highs every year, a record streak that would not be broken until the bull market of the 1990s, 70 years later! Many, including columnists in Forbes (from our Quote of the Day above), proclaimed it as a “new era” of prosperity for the country.
After taking 21 years to double, the market would *almost* double over the next 2 years, rising as high as 381.17 on September 3rd 1929 before the great depression would set in. After the monumental decline of the great depression, the Dow Jones Industrial Average would not cross back over 200 until January 11th, 1946.
Source: The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average
Best December 19th in Dow Jones Industrial Average History
1899 – Up 4.72%, 2.01 points.
Worst December 19th in Dow Jones Industrial Average History
1929 – Down 2.60%, 6.42 points.
Read of the Day
After a quiet two decades, stocks (as measured by the Standard & Poors index, not the Dow) would return 37.48% in 1927, still one of the top 10 best performing years in history.
I read a lot of Wall Street History books, and one that I open again and again is It Was a Very Good Year: Extraordinary Moments in Stock Market History
As the author, Martin Fridon says, “I genuinely believe that by closely studying a few particular slices of time, I have managed to develop a fresh perspective on the stock market.” 1927 has its own chapter in Fridson’s book, detailing the exuberance building within the stock market.