Perspective from 1933

February 2009 closes with a monthly decline in the S&P500 of 11%. It fell from 825 to 735. Headlines are “The Worst February Market Drop Since 1933!” (The S&P500 fell 18.1% in February 1933.) Wow. I guess such sensationalism sells newspapers and TV advertising, but for investors:

Does this mean ANYTHING? Let’s put it in perspective… (You will probably not read these facts in the newspaper or hear it on TV.)

In March 1933, the S&P500 rose 3.87%. In April 1933, it rose 42.87%. In May 1933 it rose 16.46%. And in June 1933, it rose 13.50%. From the end of February 1933 to the end of June 1933, the S&P500 rose 196%. That’s almost double! If history repeated with the same percentage increase, the S&P500 would rise from 735 to 1440!

Another interesting tidbit: The Dow Jones Industrial Average rose from 53.84 to 62.10 or UP 15.34% on March 15, 1933. This continues to be largest one day rise in history—in the midst of the worst depression in history. (The Dow is up 131 times to 7062 as of 2/27/09.)

Nobody, including me, is predicting such a rise, but the facts do tend to put things in perspective. During periods of high volatility, and even in the middle of very tough economic times, markets can go up a lot.

When comparing now to 1933, let’s look back to some highlights:

Nazi leader Adolf Hitler was appointed Chancellor of Germany in January. (Not exactly a bullish sign.) An attempted assignation of President-elect Franklin Roosevelt occurred in February—He was inaugurated in March and gave his “The only thing we have to fear is fear itself” speech. Also in March, President Roosevelt declared a “bank holiday” closing all US banks for one week. 4000 banks failed in 1933, on top of 5700 banks that failed the previous four years. 14 million Americans were unemployed—25% of the workforce. The legislative climate moved from conservative to liberal with lots of government spending and programs. Here is a quote from the newly elected President Roosevelt:

“Throughout the nation, men and women, forgotten in the political philosophy of the Government, look to us here for guidance and for more equitable opportunity to share in the distribution of national wealth… I pledge myself to a new deal for the American people. This is more than a political campaign. It is a call to arms.”

1933 was definitely a scary time. Nobody was then predicting an immediate end of decline. While the news today sounds a little bit similar, few would argue that the situation is as dire now. But, even in the middle of those terrible times in 1933, the stock market almost doubled in value during March thru June. When comparing the present to the past, it is important to put things in perspective.

Nobody can predict what the market will do in March, April, May or June 2009. J.P. Morgan stated the only true prediction, when asked to predict the stock market: “It will fluctuate”.

This commentary and information is provided for the benefit of clients and should not be considered a sales presentation.


See http://www.waynestrout.com/ for more complete info: Investment advisory services are offered by WS Wealth Managers, Inc., an investment adviser registered with the SEC. Wayne Strout is an Investment Adviser Representative with WS Wealth Managers Inc. in addition to serving as President/CEO and Chief Compliance Officer of the firm. Scott Sebring is an Investment Adviser Representative and Vice President. WS Wealth Managers Inc. is not affiliated with Glen Eagle Advisors LLC or Pershing LLC. Wayne Strout and Scott Sebring, dba WS Wealth Managers. Securities offered thru Glen Eagle Advisors LLC, Member of FINRA And SIPC, with clearing thru Pershing LLC, Division of Bank of New York Mellon Corporation, also Member of FINRA and SIPC.