Index of Common Stock Prices
Emily C, Sid M, Shashwat C, Brendan H
The Stock Market Boom
At the end of WW1, the United States entered a brief recession before plunging into a long period of prosperity, known as the "Roaring 20s". Optimism was present in every aspect of society, and the stock market was no different. The exuberant mood of the country caused many to think that the stock market was a get-rich quick tool, and investment in stocks surged. Further aiding the stock boom was the ability of people to buy stocks "on margin", essentially putting down only 10 to 20 percent of their own money while they borrowed the other 80 to 90 percent of the cost. Although this was extremely risky, nobody seemed to be perturbed. Confident in what seemed a never-ending rise in prices, people continued to buy stocks, even though many did not have sufficient funds. Until 1929, their decision seemed to be justified.
Recorded Stock Market Fluctuation (1920-1929)
From 1920-1929, the average stock price increased by nearly $16.40.
Black Thursday
There had already been signs of trouble earlier in the year; steel production slowed, house construction stopped, and car sales waned. But these signs were largely ignored, and stocks continued to rise. By September, the market had reached its peak, and the Dow Jones Industrial Average began dropping. On October 24, 1929, the stock market crashed. Vast numbers of people were selling their stocks; margin calls were being issued. Due to the efforts of a group of businessmen, however, the stock market recovered int he afternoon and began to climb upward, alleviating the worst of the fears.
Black Tuesday
On October 29, 1929, the stock market crashed once more, and this time, it was unable to be saved. The number of people who wanted to sell was enormous, and the ticker was soon overwhelmed. Nobody was buying, so stock prices fell even lower. People and corporations lost their life savings and investments, and the United States economy was severely hurt. The Great Depression had begun.
Differing stock prices form 1920-1929
From 1920-1929, the average stock price increased by nearly $16.40.
STOCK MARKET CRASH 1929
Essential Reasons for Stock Price Drop between 1929 and 1932
The Great Depression was essentially caused by over-speculation and overextension of credit. People were buying things in large quantities with money that they simply didn't have, in the hopes that the stock market would enable them to become rich and pay back their loans. When these people's hopes failed to materialize, the stock market bubble burst, and as these people could not pay their loans, many corporations and businesses also went bankrupt. The steep drop between 1929 and 1932 can be explained by the chain reaction of events; as businesses closed, more people were unemployed, less money came into the stock market, and stock prices continued to fall, reaching their low in 1932.