Here it is October and the most popular measure of the stock market, the Dow Jones Industrial Average, closed Tuesday at a record, 11,727, breaking the previous record by almost five points. We’re not superstitious here, are we? Everybody’s a cool, calculating investor with a tight grasp of P/E multiples, right?
Then it won’t be inappropriate to point out that October hasn’t always been our happiest financial month.
The Crash of 1987 occurred on Oct. 19, Black Monday, when the Dow started a fall that would cost it a fourth of its value.
The Crash of 1929, which launched the Great Depression, started on Oct. 24, Black Thursday, when the Dow fell from its precrash high of 381 to its all-time low of 41 in 1932.
And the Panic of 1907 — you hadn’t forgotten about the collapse of Knickerbocker Trust, had you? — began on Oct. 21. That debacle led eventually to the creation of the Federal Reserve.
We’re sure there’s no need for worry.
The previous peak for the Dow was on Jan. 14, 2000. Following that heady moment, the index began a long, sustained slide that we’ve come to know as the Dot-Com Bust. Investors who had mocked then-Fed chairman Alan Greenspan’s warning against “irrational exuberance” were laughing no more.
By the time the Dow Jones bottomed out in 2002 — on Oct. 9, as it happened — it had fallen 38 percent. High-tech stocks did worse; their index fell 78 percent.
The Wall Street Journal reports that the intervening four years has been the fourth-longest upswing since 1900, but rather than gallop, this bull market has been ambling.
The financial press reported that there was none of the boisterous celebrating at exchanges that marked previous highs and that indeed the traders were rather subdued. Perhaps that is the most reassuring indicator of all: The new record elicited no exuberance, rational or irrational.