Chart of the day: Dow 1914-1929 vs. 1982-1999

Has the bear market come to an end? It is certainly hard to say. In January, I called for 10% down in U.S. equities, which is basically where we are now (7900 on the Dow vs. the present 7776). My view has been that we would break through 2002 and 1998 lows to the down side before this was over and we have done so. But are we going lower still?

In thinking about that question, a historical parallel from 1914-1929 might make for an interesting comparison. Take a look at the graphs below for the Dow from 1914-1929 vs. 1982-1999.


The two charts are very similar. From 1914, the Dow rose from 55 to over 380, almost 7 times. From 1982 to 1999, the rise was even greater, from 800 to nearly 12,000, more than 14 times! Given the fact that the Dow collapsed by 90% after 1929, one would have thought that trouble was in store after 1999. However, looking at the charts below, one can see that the markets have held up rather well in comparison to the Great Depression.



In both cases, in 1937 and again in 2007, the markets collapsed again by 50% after the chart period graphed. However, clearly, the market action in the 1930s was of a different class, 1929-1932 having been much more severe.

In my view, the secular bear market began in 1999 for large cap stocks making 1999 analogous to 1929 and 2007 analogous to 1937 as opposed to 1929. The Dow reached the 1937 peak again only in 1945.


  1. Gregor says

    Thankyou. It’s about time someone did this chart series in a single post. This has been my operating thesis for some time. Our 2007 to 2009 decline is more severe than the 1937 decline for various reasons, most of them fundamental. However, the fact that we made a new high in the broad market this time around probably has something to do with it. (Though the COMPQ of course is more like the INDU of the 1930s).

    Good post.

  2. aitrader says

    As is often said, history doesn’t repeat but it does rhyme.

    Prognostications are hard to pinpoint with any accuracy but I think your chart comparisons are apt and telling. I would just add that the current downtrend seems unlikely to have hit bottom and the 1937 comparison, though it mirrors the current market snapshot, may not be the entire story.

    My bet is that we see a further breakdown below the 6550 level by Summer leading the DOW to levels not seen since the late 1980’s. I base this on an expected collapse in commercial real estate, mirroring the ongoing collapse in residential markets, the ongoing collapse in international trade, and dismal earnings figures in DOW components over the next two quarters.

    If it’s any consolation to folks in North America, it appears Europe is unwilling or unable to get its already unstable house in order and things will likely hit first and hardest there than in other regions.

    1. Edward Harrison says

      I have been toying with an idea regarding this that I may write up: that is that the original difference between 1929-1942 and today came from the 1% policy response by the Fed in 2003 and that this has meant a different outcome and a delayed deflationary threat. I do not think we are completely out of the woods here due to banking fragility in the U.S. and Europe in particular. However, I am now leaning toward an inflationary rebound as a likely outcome.

      So, aitrader, like you, I see CRE as a particularly nasty fly in the ointment. We shall see whether it proves fatal.

  3. aitrader says

    I think you are likely right about the low rate and delay. Certainly worth further analysis. Looking forward to reading it.

  4. stilettoheels says

    I assume that these Dow charts are nominal, index only. You may be interested in the chart of the Four Bad Bears from Doug Short.

    A better comparison would be real, total returns. The S&P500 (a superior index in my opinion) data is available from Political Calculations.

    The real, annualized total return for your 5 charts listed in order of appearance are:

    1… 9.82%
    3… 6.10%
    4… 9.32%
    5… 8.02%

    I’m certain that most equity investors would be pleased with a 8.02% annualized real, total return for the 8 years ending in 2015. Inflation and dividends matter.

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