Tom Petruno : If this isn't 1929-'32 again, history sees a market rebound
[Tom Petruno has been chronicling financial markets' highs and lows since 1979, and has been the Times' financial columnist since 1990. He writes on markets, corporate finance and the economy, and how it all ties in to individual investors' portfolios.]
Finally, it’s over.
Wall Street closed out a horrendous year on a positive note today, with stocks rallying broadly. The Dow Jones industrial average gained 108 points, or 1.3% to finish the session at 8,776.39.
But for the year, the bear was large and in charge. The Dow lost 33.84% -- the third-worst calendar year decline in its 112-year history, barely edging out the 33.77% drop of 1930....
Going solely on the historical record, the odds favor a market rebound. Whether it would have legs beyond '09 is another question.
The accompanying chart shows the 10 biggest annual declines in the Dow’s history, since 1896, and the index’s performance in the following year. In eight of the 10 instances, the market rallied the next year.
The two glaring exceptions: 1930 and 1931, at the start of the Great Depression. The market’s losing streak in that era stretched from 1929 through 1932.
If you’re not willing to buy into talk of Great Depression II (and of course, few Wall Street pros are in that camp -- it's bad for business), then 1907 might provide a better comparison with 2008, says Paul Hickey, a partner at Bespoke Investment Group in Harrison, N.Y.
As in 2008, the U.S. was racked by a major credit crisis in 1907, fueled by the failure of Knickerbocker Trust Co., Hickey notes. The debacle sparked other bank failures and panicked the stock market, driving the Dow down 37.7%.
But as fears of economic catastrophe ebbed in 1908, investors returned. The Dow surged 46.6% that year....
Read entire article at LAT
Finally, it’s over.
Wall Street closed out a horrendous year on a positive note today, with stocks rallying broadly. The Dow Jones industrial average gained 108 points, or 1.3% to finish the session at 8,776.39.
But for the year, the bear was large and in charge. The Dow lost 33.84% -- the third-worst calendar year decline in its 112-year history, barely edging out the 33.77% drop of 1930....
Going solely on the historical record, the odds favor a market rebound. Whether it would have legs beyond '09 is another question.
The accompanying chart shows the 10 biggest annual declines in the Dow’s history, since 1896, and the index’s performance in the following year. In eight of the 10 instances, the market rallied the next year.
The two glaring exceptions: 1930 and 1931, at the start of the Great Depression. The market’s losing streak in that era stretched from 1929 through 1932.
If you’re not willing to buy into talk of Great Depression II (and of course, few Wall Street pros are in that camp -- it's bad for business), then 1907 might provide a better comparison with 2008, says Paul Hickey, a partner at Bespoke Investment Group in Harrison, N.Y.
As in 2008, the U.S. was racked by a major credit crisis in 1907, fueled by the failure of Knickerbocker Trust Co., Hickey notes. The debacle sparked other bank failures and panicked the stock market, driving the Dow down 37.7%.
But as fears of economic catastrophe ebbed in 1908, investors returned. The Dow surged 46.6% that year....