Mark Hulbert reruns the Great Depression numbers and concludes that it only took investors who owned stocks in the fall of 1929 4.5 years to recoup their losses after the Great Crash.
We'd like to see the underlying data, because this is far shorter than other studies we've seen. But Hulbert's twist is to include the effect of deflation and a broader index than the DOW, which most other studies don't.
To be clear:
- It took the DOW 25 years to regain its 1929 highs in nominal terms.
- Including dividends, which reached a high of 14% at the depths of the crash (when the market was down almost 90%), it took about 10 years for 1929 DOW investors to get their money back.
- Including deflation, dividends, and a broader market measure than the DOW (according to Hulbert), it took 5 years.
Why use a broader measure than the DOW? Because the Dow Jones DOW committee has engaged in some lousy stockpicking over the years, including throwing IBM out of the index for 40 years.
IMPORTANT: Don't use this to assume you'll get all the money you've lost over the past 18 months within, say, another 18 months. Anything's possible, but even after a 50% drop in the indices, current dividend yields (2.7%) are still below the long-term average. Our minor deflation has not yet taken the value of a dollar below its valuation at the peak. And the market's valuation in 2007 was higher than its valuation at any market peak other than 1929 and 2007 (on a cyclically adjusted PE--see this chart).
Hulbert's study is still encouraging for buy-and-hold folks, however:
[A]ccording to a Hulbert Financial Digest study of down markets since 1900, the average recovery time is just over two years, when factors like inflation and dividends are taken into account. The longest was the recovery from the December 1974 low; it took more than eight years for the market to return to its previous peak, which was reached in late 1972.
FAQs
Mark Hulbert reruns the Great Depression numbers and concludes that it only took investors who owned stocks in the fall of 1929 4.5 years to recoup their losses after the Great Crash.
How long did the stock market take to recover after 1929? ›
The Dow Jones did not return to its peak close of September 3, 1929, for 25 years, until November 23, 1954.
What caused the stock market crash of 1929 answers? ›
Among the more prominent causes were the period of rampant speculation (those who had bought stocks on margin not only lost the value of their investment, they also owed money to the entities that had granted the loans for the stock purchases), tightening of credit by the Federal Reserve (in August 1929 the discount ...
Why did the stock market lost almost 90% of its value between 1929 and 1933? ›
The 1929 crash was caused by many factors, such as a boom after World War I, overproduction in key industries, increased use of margin for purchasing stocks, lack of global buyers around the world due to the war, and so on.
What percent of Americans had invested in stocks before the crash of 1929? ›
The crash affected many more than the relatively few Americans who invested in the stock market. While only 10 percent of households had investments, over 90 percent of all banks had invested in the stock market. Many banks failed due to their dwindling cash reserves.
What is the longest time for the stock market to recover? ›
As shown in the table below, the recovery period for U.S. stocks has been as long as 15 years: In the wake of the 1929 Crash, the IA SBBI US Large Stock Index didn't fully recover until late 1944.
Can you lose your 401k in a recession? ›
The value of a 401(k) account, or any retirement account, always depends on how the account is invested. For many people who are still decades away from retirement, their portfolios will largely consist of stocks, which may suffer declines during a recession or economic slowdown.
Who benefited from the 1929 crash? ›
Several individuals who bet against or “shorted” the market became rich or richer. Percy Rockefeller, William Danforth, and Joseph P. Kennedy made millions shorting stocks at this time. They saw opportunity in what most saw as misfortune.
Who made money during the Great Depression? ›
Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
What could have prevented the stock market crash of 1929? ›
How could the Stock Market Crash of 1929 been prevented? Had the Federal Reserve and other governing bodies established a separation of banks and investment firms, the stock market would likely not have become saturated, especially with borrowed money.
When the stock market declines, the market value of your stock investment can decline as well. However, because you still own your shares (if you didn't sell them), that value can move back into positive territory when the market changes direction and heads back up. So, you may lose value, but that can be temporary.
What ended the Great Depression? ›
Despite all the President's efforts and the courage of the American people, the Depression hung on until 1941, when America's involvement in the Second World War resulted in the drafting of young men into military service, and the creation of millions of jobs in defense and war industries.
What happened to the value of stocks after the stock market crashed in 1929? ›
By mid-November, the Dow had lost almost half of its value. The slide continued through the summer of 1932, when the Dow closed at 41.22, its lowest value of the twentieth century, 89 percent below its peak. The Dow did not return to its pre-crash heights until November 1954.
Who shorted the stock market in 1929? ›
Tom Rubython, author of "Boy Plunger Jesse Livermore: The Man Who Sold America Short in 1929", discusses whether the legendary trader's strategies were good luck or genius.
How many banks failed during the Great Depression? ›
In all, 9,000 banks failed--taking with them $7 billion in depositors' assets. And in the 1930s there was no such thing as deposit insurance--this was a New Deal reform. When a bank failed the depositors were simply left without a penny.
Who was most affected by the stock market crash of 1929? ›
The crash affected many more than the relatively few Americans who invested in the stock market. While only 10 percent of households had investments, over 90 percent of all banks had invested in the stock market. Many banks failed due to their dwindling cash reserves.
How long did it take the Great Depression to recover? ›
Although the U.S. economy began to recover in the second quarter of 1933, the recovery largely stalled for most of 1934 and 1935. A more vigorous recovery commenced in late 1935 and continued into 1937, when a new depression occurred.
How long did it take for stocks to recover from the 2008 recession? ›
For example, it took the stock market just over two years to recover from the 1987 stock market crash. However, it took the market almost six years to recover from the dot-com bubble burst in 2000. For the financial crisis of 2008, it took close to five years for the stock market to bottom out and start recovering.
How long did it take for stocks to recover from 2008? ›
The bounce-back from the 2008 crash took five and a half years, but an additional half year to regain your purchasing power.
How much value did the stock market lose in 1929? ›
The stock market ultimately lost $14 billion that day. The stock market crash crippled the American economy because not only had individual investors put their money into stocks, so did businesses. When the stock market crashed, businesses lost their money.
Mark Hulbert reruns the Great Depression numbers and concludes that it only took investors who owned stocks in the fall of 1929 4.5 years to recoup their losses after the Great Crash.