Secular Bear Market 1929 - 1949

The Bubble Bursts:

The roaring 20's ended in 1929 leading to 20+ years of volatile and sideways market action in the Dow Jones Industrial Average. In total the Dow lost over 55% of its value from the market highs set in October 1929 leaving investors with a negative (4%) annualized rate of return for their efforts. During this secular bear market the nation had survived the Great Depression and World War II, only to be embroiled in the Cold War in 1949 (see Market Timeline).

The 1929 - 1949 secular bear market saw the Dow experience four cyclical bear phases and three cyclical bull phases (see Table 1). The cyclical bull phases were extremely strong but each one was meet with cyclical bear phase all of which dragged the Dow through an extended sideways trading range. In fact the Dow did not actually surpass the equity level set prior to the 1929 crash until November 1954 a full 25 years later.

The chart, tables and timeline presented below will provide a complete overview of the 1929 - 1949 secular bear market.

Chart 1: Dow Jones Secular 1929 - 1949 Bear Market

Note: The end of the secular bear market was complete in 1949, based on the Dow's ability to generate higher lows (June - 49 greater than April - 42) and (April - 42 greater than June - 32) and subsequent higher highs set by the Dow (May 46 greater than February - 37). This sideways action would eventually lead to the explosive market that began in mid 1949.

Table 1: Secular/Cyclical Market Review:

Market Timeline 1929 - 1949:

After World War I (November 1918), the Dow Jones generated substantial gains during the long-term 1921 - 1929 bull market. The speculative bubble bust on Wall Street in 1929 effectively ending the roaring '20s.

• Dow Jones crashes on October 29, 1929 falling 12.8% and 11.7% in two days. This led to the full 88% loss experienced by the Dow through mid 1932.
• The Great Depression is ushered in based on farm foreclosures and bank failures.
• The depths of Depression hit in 1932 with the Dow Jones hitting a low of 41.22.
• Franklin Delano Roosevelt is elected President in 1932. He begins his first of four presidential terms.
• Congress passes the New Deal (1933) attempting to provide recovery and relief from the Great Depression through programs of agricultural and business regulation, inflation, price stabilization, and public works.
• The Securities Exchange Commission (SEC) is established in 1934.
• President Roosevelt signs the Social Security Act in 1935.
• The Dow surges 200% from 1933 to 1936 based on the efforts of FDR.
• In 1939 the Great Depression is over.
• World War II begins in mid 1939 as Britain, France, Canada, Australia and New Zealand declare war on Germany. The United States proclaims neutrality.
• Hitler takes Paris in May 1940 initiating a 17% decline in the Dow in just a few short weeks.
• Japan bombs Pearl Harbor December 7th, 1941. The United States declares war on Japan. The Dow falls 6.5% in a few days.
• April 1942 the Dow ends a three year 33% slide. The U.S. war efforts are well under way.
• June 6, 1944 the U.S. Military and its allies storm the beaches at Normandy on D-Day.
• Germany's unconditional surrender May 8, 1945 V-E Day.
• The Japanese surrender in 1945 shortly after Hiroshima (August 6, 1945) helping to cap a strong 103% four year run in the Dow.
• The "Cold War" begins in 1945 setting the stage for the peak in the Dow Jones in mid 1946 setting off a three year sideways consolidation.
  

At the end of the 1929 - 1949 secular bear market the Dow Jones had produced a negative (4%) annual rate of return for investors. This extended 20 year bear market would however set the stage for the coming secular bull market that would begin mid 1949.

Click to view the next secular market in the Dow Jones covering the 1949 - 1966 period.

Table 2: Annual Returns by Year:

Detailed Timelines for Other Secular Markets:

Secular 1949 - 1966 Bull Market
Secular 1966 - 1982 Bear Market
Secular 1982 - 1999 Bull Market
Secular 1999 - Present Bear Market

[Return to the main secular market overview]