Congratulations: You Survived the Wildest Market Conditions Since 1929

By: Justice Clark Litle

2 weeks ago | News

Have you ever wondered what the 1929 stock market crash was like?

Have you ever imagined how it might feel, as an investor, to endure 1929-level panic and turmoil?

Have you ever wondered if you could handle it?

Well, you don’t have to wonder anymore, because it just happened.

The extreme volatility and fear displayed on Monday broke all records going back 91 years, all the way to the crash of (you guessed it) 1929.

On Friday of last week, we warned of crash risk right here in these pages, and said specifically we’d be watching closely on the Monday calendar dates of March 16 and March 23.

Well, on March 16 — this past Monday — the Dow Jones industrial average dropped nearly 3,000 points, its largest point drop of all time and its second-largest percentage drop of all time.

As a notable aside, the drop happened more or less for exactly the three reasons we said it would. Last week, we pointed to “crash alert” dangers including: 1) accelerating coronavirus fears, 2) the Federal Reserve doing something big and getting no traction, and 3) signs of big market players in trouble.

All those factors hit over the weekend.

The coronavirus news got serious in terms of quarantine measures on both coasts, the Federal Reserve fired its big bazooka on Sunday night — with overnight futures markets going “limit down” as an instant reaction — and on Monday we also learned that multiple big-name hedge funds, who collectively manage hundreds of billions of dollars, are down big on the year (and were likely forced sellers in the crash).

But the 1929 comparisons don’t stop there. They also extend to the S&P 500 and the CBOE Volatility index, also known as the VIX.

In falling 12% on Monday, the S&P 500 marked its third day in a row of moving 9% or more in a single trading session. The S&P hasn’t seen three back-to-back days of 9% or greater since 1929.

The past few days, in other words, have delivered head-slamming volatility of an intensity no investor alive has experienced. (Warren Buffett wasn’t born yet in 1929 — he was born in 1930.)

The VIX is known as Wall Street’s fear gauge. It’s considered a fear gauge because big spikes in the VIX are associated with intense fear rather than euphoria.

The VIX also smashed records this week.

On Nov. 21, 2008, the VIX closed at an all-time peak of 80.74. In the crazy action of March 16, the VIX surged an eye-popping 43% to hit 82.69, a new record high.

We don’t know the volatility comparison measures for 1929 or 1987 because the VIX didn’t exist back then — it was created in 1993.

But still, given the other metrics — like the S&P’s greater than 9% swings three days in a row — we can be confident that fear and panic levels compared to 1929 as well.

So, what does this mean?

On one level it means that, as an investor, you deserve to be congratulated. In terms of market conditions, you made it through the worst the market has ever dished out.

That’s a meaningful thing, too, because survivors reap the rewards of reaching the other side.

Once the shock and turmoil of the pandemic crisis is worked through — and it will be — there will be incredible opportunities afoot.

And in fact, the way the market works, in terms of anticipating positive future events, these opportunities will start looking good well before the crisis conditions end. (Markets will start turning higher when there is light at the end of the tunnel, not when victory is declared.)

And so, because you deserve it, congratulations. As market participants, we just made market history.


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