On the flip side, when it drops, the stock market goes with it.
The fact that the market had fallen 10% before the bankers intervened made other people wary of the market and probably they’re the ones who started selling the following Monday and Tuesday.
There were initial signs from the stock market already around early September but by October the market was in no mood for a recovery. Crowds gather around a statue of the first U.S. President George Washington about a block from the New York Stock Exchange on Black Thursday, Oct. 24, 1929.
On Black Tuesday, nearly 16 million shares were traded. Some even went so far as to finance two-thirds of the stock’s value when being purchased.
All these factors led to what was the longest period of depression in the history of the United States. “Mitchell more than any 50 men is responsible for this stock crash.”, The Federal Reserve Bank rate hike and the Gold standard. It all started a half a week earlier on Black Thursday or, due to Europe’s time difference, Black Friday.
As share prices dropped the ticker tapes literally could not keep up with the pace. Want to practice the information from this article?get trading experience risk-free with our trading simulator.
So what was the real story? Prices on the Dow Jones Industrial Average increased continuously throughout the 20s leading up to September 3. This steady pace of lending and speculation led to a bubble in the stock markets, which eventually popped in September 1929.
During the 20s, real estate values were on the continuous rise. On “Black Monday,” the 28Th, investors sold record amounts of stock that resulted in the Dow losing 13% of its value in a single day. Black Tuesday refers to a precipitous drop in the value of the Dow Jones Industrial Average (DJIA) on Oct 29, 1929. The Great Depression really began when the banks started failing in 1930, and then there were more bank failures in 1931 and 1932, leading to a bank holiday when FDR became president in ’33. This had a cataclysmic effect on the stock market and by the next day, everyone wanted out.
Twenty years later, in November 1954, the Dow Jones industrial average finally broke past the previous all time high at 380, just before the start of Black Thursday and the stock market crash. Milton Friedman and Anna J. Schwartz’s book A Monetary History of the United States, 1867–1960 pointed out there was no connection between the 1929 Wall Street crash and the Great Depression.
We might have had another Great Depression if the Fed hadn’t done what it did.
While each day of the week starting since Black Thursday was given a name, Black Tuesday stands out as it marked the start of a long a tumultuous time in the stock market’s history and led to the Great Depression. Some people say the reason these things happen over and over again is that people do tend to forget that they can happen. While there have been other stock market crashes, with bigger numbers, the 1929 stock market crash and Black Tuesday stands out.
Al Hill is one of the co-founders of Tradingsim. Black Thursday and the subsequent stock market crash of 1929 led to the complete revamp of regulations on the U.S. securities industry. It was a booming time for the economy with the Dow Jones Industrials rising rapidly between the periods of 1924 through 1929 and it was considered to be the longest bull run of its time.
Now the Federal Reserve doesn’t seem to be tightening.
Consumers took a step back from excessive purchases as some of the had lost their savings deposits with the banks which had lent money recklessly. The heavy lending led to nearly $8.5 billion being given out in loans, purely to speculate on the stock market. On Black Tuesday, over 16 million shares were traded, most of them being offloaded by investors. The stock market crash in 1929 was the climax to the previous years of solid economic expansion in the United States.
The stock market would continue to tumble for the next few weeks. In an effort to stop the excessive lending that still continued, the Federal Reserve Bank finally had to raise the discount rate, which automatically raised the rates that borrowers had to pay including the consumers who borrowed money from the banks. Black Tuesday marked the end of the stock market rout in some ways as the Dow Jones pulled back higher on Wednesday and Thursday.
Due to the close correlation with the real estate and the U.S. equity markets, when the real estate market starts rise, the stock market also follows.
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