The Dow, 2008 vs. 1987 vs. 1929 (as of 12 Aug. 2010)
Posted Oct29-08 at 04:10 PM by Redbelly98
Updated Aug13-11 at 06:59 PM by Redbelly98 (Update graphs)
Updated Aug13-11 at 06:59 PM by Redbelly98 (Update graphs)
A comparison of the Dow Jones Industrial Average during the financial crashes of 1929, 1987, and 2008.
Looking at the 3 months before & after each of the three crashes:
An 18 month time frame:
And finally, here is a five-year graph:
The Dow took quite a different track in the years following 1987 (green curve) than it did following 1929 (red curve). However, it was not until late May following either of these crashes that there was any noticeable trend toward either recovery (1988) or further decline (1930).
The lowest close of The Dow during the Great Depression was on 8 July 1932, when it closed at 41.22. This would be the equivalent of about 1330 points today. We have passed by the analogous point in time as of June, 2011.
I will update these graphs from time to time.
Looking at the 3 months before & after each of the three crashes:
An 18 month time frame:
And finally, here is a five-year graph:
The Dow took quite a different track in the years following 1987 (green curve) than it did following 1929 (red curve). However, it was not until late May following either of these crashes that there was any noticeable trend toward either recovery (1988) or further decline (1930).
The lowest close of The Dow during the Great Depression was on 8 July 1932, when it closed at 41.22. This would be the equivalent of about 1330 points today. We have passed by the analogous point in time as of June, 2011.
I will update these graphs from time to time.
Total Comments 26
Comments
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Just find another chart that compared Nasdaq, Nikkei, Dow at 1929 and current SPX:
LIt seems after a crash on index, always an L-type trends formed and at least 10-20 years of recovery.Posted Dec3-09 at 06:01 PM by Peter_Pan6688 
Updated Dec3-09 at 06:06 PM by Peter_Pan6688 -
This chart may be clear.
Posted Dec3-09 at 06:03 PM by Peter_Pan6688
Updated Dec3-09 at 06:09 PM by Peter_Pan6688 -
The correlation is pretty eerie in the Nasdaq2000 vs. DJI1929
Posted Dec3-09 at 11:30 PM by Redbelly98
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I hate to be the downer here, but trying to find a pattern in the stock market, or the Dow in particular is like trying to find meaning in a Britney Spears song: there isn't one.
The 30 companies that comprise the Dow Jones Industrial Average derive their share prices based on two fundamental things 1) discounted free cash flows and 2) a market premium.
There are so many mitigating factors as to why comparing all the different time periods is like comparing apples to oranges. For example, and this is important: there were completely different companies listed on the Dow average in 1929, in 1987, and 2009! Not only were they totally different companies in each time period, but in 1929 there were only 12 companies total, compared to 30 in later years.
In short: don't waste your time with trying to find patterns in the stock market.
To make an analogy, it is as if an intelligent person wished to find out what the pattern for a particle suspended in a glass of water is, and then to try and predict where that particle would travel next without ever having the slightest understanding of Brownian motion. To be clear, there are deeper fundamental principles in the stock market. Attempting to discover superficial patterns will distract you from these deeper principles.Posted Dec6-09 at 12:17 AM by koontz
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Agreed. This is just meant to make comparisons among the three historic market crashes, not to predict the future of the market. That would be folly.
Since the Dow is commonly used as an indicator of market health, that was the metric I chose. All we can say, when we compare the graphs, is that the crash of 2008 was/was not as severe as the ones in 1929 or 1987, using this particular metric.Posted Dec6-09 at 07:55 PM by Redbelly98
Updated Aug13-11 at 07:01 PM by Redbelly98 -
I have updated the Dow 5-year graph.
Posted Aug13-11 at 07:02 PM by Redbelly98
