Stock Market Crash Of 1929

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DEFINITION of 'Stock Market Crash Of 1929'

A severe downturn in equity prices that occurred in October of 1929 in the United States, and which marked the end of the "Roaring Twenties." The crash of 1929 did not occur in one day, but was spread out over a two-week period beginning in mid-October.

The first portion of the crash occurred on October 24, a day known as Black Thursday. The following week brought Black Monday (Oct. 28) and Black Tuesday (Oct. 29) – the Dow Jones Industrial Average fell more than 20% over those two days. Pre-existing selling pressures and fear in the stock market were exasperated by a flood of sell orders that shut down the ticker-tape service that provided stock prices to traders. With key information missing from the markets, selling intensified even further.

Despite a few attempts at recovery, the stock market continued to languish, eventually falling almost 90% from its peak in 1929.

BREAKING DOWN 'Stock Market Crash Of 1929'

The lead-up to October 1929 saw equity prices rise to all-time high multiples of more than 30 times earnings, and the benchmark Dow Jones Industrial Average (DJIA) had risen 500% in just five years! This type of hyper-growth has shown itself to be unsustainable over time, as markets generally perform their best when they can grow steadily.

It took over 25 years for the DJIA to get back to the highs of the 1929 market, as the U.S. economy suffered through what we now call the Great Depression. Major new legislative and regulatory changes were enacted following the speculative bubble and crash of the 1920s in an effort to prevent the same situation from happening again.

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