What Do 100 Years of Stock Market Crashes Teach Us?

History repeats itself… a saying used by many powerful people, a premonition for the future, and the lyrics of a pretty good  J. Cole song. When it comes to recessions and market crashes, it is somewhat true. From the stock market crash 1929 to today, history has become Bill Murray in “Groundhog’s Day.”

As a disclaimer, I am not providing you your investment strategy for the next decade, but I will show you some coincidences that are too uncanny.

Here are some examples of market crashes that occurred 100 years after an unrelated market crash. 

Panic of 1819, Depression of 1920-21, Coronavirus 2020

The Depression of 1920 was short, lasting for a little over a year. After World War I, there was sharp deflation not only in the United States but in other countries. It ended quickly and led to the roaring twenties. 

Now, due to COVID-19 The government issued a lockdown causing many companies to temporarily close, the market crashed over 30 percent in one month, and many lost their jobs as unemployment hit levels not seen since the Great Depression.

While short economic downturns are better than long ones, unfortunately, you’ll see they definitely reoccur. And people not being able to pay their mortgages in 1819, well I wish I could say that wouldn’t be an issue again. 

Depression of 1807, Panic of 1907, Great Recession (2007-09)

The Depression of 1807 was a result of foreign policy. As tensions were rising between Britain and France, a trade embargo was issued by President Jefferson to keep the United States neutral. The U.S. ended up getting involved via the War of 1812 anyways.

The Panic of 1907 was not as long, but did have an impact on the stock market. Starting in October, the New York Stock Exchange declined 50% in one month. This caused many to withdraw their money from banks out of fear. 

The Great Recession happened so recently most of us should know how it went. The housing market was booming, the bubble burst, banks had to get bailed out, and many lost their job.

This wasn’t only bad in the U.S., the whole world went into a recession and it had many lasting implications.

“September and October of 2008 was the worst financial crisis in global history, including the stock market crash 1929 (Great Depression,)” – Ben Bernanke, former head of the U.S. Federal Reserve. 

Panic of 1901, Dot-com bubble (2001-02)

The Panic of 1901 was the first market crash the New York Stock Exchange suffered. It is also known as “the rich man’s panic”.

The panic was caused by two businessmen who were in competition for financial control of the Northern Pacific Railway. One of those men, E.H. Harriman, set off the crash by buying up Northern Pacific’s stock to try to gain control of the railway. As a result, other railroad companies started to fall, and investors went into a panic, selling as soon as they could.

The dot-com bubble saw the NASDAQ lose over 70% of its value. Starting in 1995, investors fell in love with anything internet and tech related.

Many companies IPOed (An IPO is an “initial public offering”; the process of a private corporation offering shares to the public)  to valuations much greater than their actual value. After the bubble burst, many companies became penny stocks. Some companies survived while others never recovered.

The Stock Market Crash 1929… Now 2029?

Remember those roaring twenties I mentioned before? Well, they ended terribly.

The Greatest Depression in U.S. history started in the stock market crash 1929. Some say it ended in 1933, some say it didn’t end until World War II. Either way, it was ugly. Unemployment peaked at almost 25%. The stock market lost almost 90 percent from 1929 to 1933. Around 11,000 banks failed and more than $1 billion in bank deposits were lost. It was a truly trying time.

With the current market issues and uncertainties from coronavirus, are we now in a mini- recession that will lead to another roaring twenties? And possibly another crash at the end of the decade again? What bubble will burst this time? 

“Those who do not learn history are doomed to repeat it.”

We’ve seen how people having mortgage issues hurt the economy. Due to the coronavirus emergency, the government is providing mortgage forbearance.

This will impact banks, tenants, landlords, and everyone in between. Have we or have we not learned from history to set ourselves up for a better future.

As famous investor Warren Buffett says, “It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”

Yes, there have been other recessions that occurred and then 100 years later, nothing. But it’s something to be mindful of, so in 2029 if you lose a considerable amount of money, I would hate to say “I told you so.”