Another fascinating set of historical charts from Ron Griess of The Chart Store looking at the post depression/crash era up to WW2:

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Category: Data Analysis, Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Swing Charts of S&P 1929-42”

  1. machinehead says:

    I knew that 1942 was a major low … but never realized how severe was the drop in May 1940. Here’s the background, from John Dennis Brown’s 101 Years on Wall Street:

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    In May 1940, ‘sitzkrieg’ turned to blitzkrieg and the Nazis swept the Allies from Western Europe. The stock market collapsed in what would be the worst panic of World War II, much worse than that which followed Pearl Harbor.

    During the winter and early spring, the Industrials had constructed a classic ‘line’ formation, a long horizontal movement which had been bounded on the top by Dow 152 and on the bottom by 145. On May 9th the average had closed mid-range, at 148.

    The German blitz forced the British to the beaches at Dunkerque and the Industrials suffered a frightful fall from their ‘shelf,’ losing nearly 25 percent within a few weeks to a low at 112. Volume of nearly 4 million shares on May 21, when the Dow dropped 6.8 percent, would stand as the most active day of the decade.

  2. Marc P says:

    I’m having a difficult time understanding this chart. What is the left scale? What are the little numbers? The percentages are from one change in direction to the next change in direction? Is this based upon the S&P index in gross/nominal? Adjusted for inflation? Adjusted for the change in the components of that index? It would be much appreciated that charts be labeled properly. This trend is unfortunate in the popular press, but this website is supposed to be at a higher level than Newsweek or Reuters.

  3. royrogers says:

    so where are we on the chart ??

  4. James says:

    Good stuff. I’d love to see the next chart in the sequence, as war production continued to crank up and the outcome became increasingly clear.

  5. Winston Munn says:

    Looks like these charts could be titled: How to Kill a Recovery – the 1937 Austerity Measures Revisited.

  6. GreatWarrior says:

    Barry, still swinging on the long side, target SPX 1260? Thanks

  7. nofoulsontheplayground says:

    I’m always a bit puzzled as to why the “Battle of Midway” 1942 low was such a pivotal event for the stock market. Sure, it was a turning point for the battle against Japan, but it was only the beginning of a long and drawn out effort that took another 3-1/2 years to finish.

    If the market is a voting mechanism, it appears the market thought Japan was a greater threat to the United States than Germany was in WWII. Maybe that’s why Congress never declared war on Germany.

  8. machinehead says:

    Marc P — the left scale is the nominal value of the S&P Composite at the time.

    To see this, consider that today, the numerical value of the S&P 500 is slightly more than 10% of the Dow Industrial Average. In 1942, the S&P was slightly less than 9% of the DJIA, having outperformed it over the succeeding seven decades.

    Yes, the nominal index numbers REALLY HAVE run up by a factor of 100. Thank the master inflators at the Federal Reserve for this head-smacking distortion of the monetary numeraire!

  9. machinehead says:

    ‘Adjusted for the change in the components of that index?’

    S&P adjusts the index divisor for component changes, so that the index value is unaffected. This is standard procedure for indexes. It’s necessary because of mergers, acquisitions and bankruptcies, as well as for discretionary reasons.

  10. bishophicks says:

    For nofoulsontheplayground:

    Congress declared war on Germany on Dec 11, 1941:

    Whereas the Government of Germany has formally declared war against the Government and the people of the United States of America:

    Therefore be it Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the state of war between the United States and the Government of Germany which has thus been thrust upon the United States is hereby formally declared; and the President is hereby authorized and directed to employ the entire naval and military forces of the United States and the resources of the Government to carry on war against the Government of Germany; and, to bring the conflict to a successful termination, all of the resources of the country are hereby pledged by the Congress of the United States.

    Approved, December 11, 1941, 3:05 p.m., E. S. T.

    I think the April 1942 bottom was a long reaction to one piece of bad news after the other in the Pacific. Japan kept advancing and we kept losing ships and territory. I would like to see a version of this chart showing major battles/turning points of the war. I would like to see how the market reacted to the battle of Midway which took place about 6 weeks after the last chart ends.

  11. NeutralObserver says:

    Have a look at this plot comparing the USA and Europe to Japan’s lost decades with appropriate scaling factors.

    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/SPX%20Nikkei.jpg

    Looks like we all follow the same sorry path for the same reasons – human nature. That and the fact that the corrupt people who created the problems are still in all the decision making positions, so no real change can happen.

  12. James says:

    > I’m always a bit puzzled as to why the “Battle of Midway” 1942 low was such a pivotal event for the stock market

    Midway took place in June of 1942, two months after the market turned, and one month after the Battle of the Coral Sea, an engagement that ended the Japanese advance on Port Moresby. Up until Coral Sea, it had been one Japanese success after another, including the Bataan surrender in early April, 1942. The one US success before Coral Sea – the April 18, 1942 Doolittle raid.

    It may be the market, as someone noted, had decided too much bad news had been discounted (of course, if the Battle of Midway had been a defeat and Midway had fallen, the S&P turn most likely would have been short-lived).

    Beginning certainly with the Battle of Midway, successes in both theaters began to mount, slowly but surely, and the mmomentum had clearly began to shift. It’s worth noting that the combined industrial production of the Axis powers was nowhere near the potential of this country’s, meaning once the US entered the war time was against the Axis powers as long as Britain and the Soviet Union could be kept in the war, and Germany wasn’t able to produce a game changing weapon.

  13. budhak0n says:

    now “that’s” a chart but the parallels are hard to draw. I guess it all depends on your views on all of this capital “influx” made up out of thin air.

    Some people despise it as what it is, something that generally cheapens the currency itself. Others applaud it.

    Until they get some kind of handle on what they’re going to do with all this funny money floating around, it’s really hard to make a call based on data that’s so old but it is useful if only from a “kick it around” in the noggin way.