Investors spent the majority of their time during the Great Depression just licking their wounds and waiting for the best regarding their stock market losses. It required a very long time, and even a world war before the stocks was back on track.
During this terrible and painful decade, probably the worst year of them all was 1931. That’s the year in which the market had the biggest decline in the S&P over the last 94 years. In the year that followed, the market would decline even worse, capping the only run of four consecutive horrible years in the stock market from 1928 up to this day.
In early 2007, the very first sign of trouble started to show in the housing market. The woes were limited to “subprime” borrowers or even folks with below-average credit scores who had mortgages. In that May, Ben Bernanke, the Federal Reserve chairman at the time, decided to make the following statement at a financial conference in Chicago he was attending:
“We strongly believe the effect of the troubles in the subprime sector that can be seen on the broader housing market will be fully limited and we don’t expect many spillovers from the subprime market to the rest of the economy or even to the financial system.”
However, a bit later, everything went south. The financial system started to melt down, and the stocks went into an epic slide. So we can fairly say that 2008 was the second-worst year since the Great Depression.
As mentioned before, the 1930s were a very difficult time, as America was stuck in the quicksand of the terrible Great Depression. As the nation would start to pull its way out of the mud, it would soon start to sink again. Under President Franklin D. Roosevelt, the government came up with New Deal projects, in order to convince people to get back to work.
At those times, it looked as if the efforts might change something. Even so, in 1937, after a time of apparent recovery, the economy sank again, and stock prices completely plunged along with it.
As the financial writer Jason Zweig said, the 1973-74 bear market was nothing but a “slow-motion mudslide” that “seemed to be endless”. Because of many factors, such as the Watergate scandal and runaway inflation, everything went down in what seemed to be the worst bear market since the Great Depression. Remembering those times in 1997, William M.B. Berger recalled just how painful that period was.