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100 years of Market Cycles

Market Analysis


1930-1931 Bear Market

The 1930-1931 bear market started in October 1929 and lasted for more than two years with the market losing 90%. The bear market ended in July 1932.

Charts from stockcharts.com are used to analyze all of the market cycles that have occurred over the last hundred years. Analyzing the market cycles with charts gives stock investors a visual representation of how the stock market moves over time.

The Dow Industrial Average is used to analyze the 1930-1931 bear market and all market cycles prior to 1957 (The S&P 500 index was formed in 1957 and all market cycles from 1957 are analyzed using the S&P 500 index).

100 Year Market Chart

The following chart shows the 1930-1931 bear market on a 100-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 100yr: 1930-1931 Bear Market

The 1930-1931 bear market on a 100-year chart for the Dow Industrial Average plotted as a monthly bar chart.

As can be readily observed from the long-term 100-year market chart, the 1930-1931 bear market was a severe bear market, however this was an exception and is not typical of the many bear markets that have occurred.

The 100-year market chart also shows a 240-month simple moving average which has spent most of the last hundred years trending upwards. This shows that over the long-term the market has broadly continued higher as the moving average followed the Dow Industrial Average higher.

20-year Market Chart

The following chart shows the 1930-1931 bear market on a 20-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 20yr: 1930-1931 Bear Market

The 1930-1931 bear market on a 20-year chart for the Dow Industrial Average plotted as a monthly bar chart.

A 12-month simple moving average is also plotted on the 20-year market chart. The 12-month moving average is a useful indicator used in Technical Analysis for highlighting market cycles. As the 20-year market chart shows, the 12-month moving average followed the 1930-1931 bear market lower.

The 1930-1931 bear market was so severe that it bottomed well below the lows from the start of the preceding 1922-1929 bull market which began in late 1921. The severity of this bear market helped to set the tone for the worst economic conditions seen - the 1930s Great Depression.

However, the severe plunge did set up a barging hunting frenzy which fueled the rebound with the 1932-1936 bull market. This rebound bull market at least raised the Dow Industrial Average back to the levels seen around the middle of the 1922-1929 bull market.

Most investors new to the stock market are under the impression that the stock market only moves in the direction of the current market cycle.

In reality, the stock market moves in cycles and alternates between bull markets (where stock prices broadly increase) and bear markets (where stock prices broadly decline).

Fortunately for investors, bull markets are usually longer than bear markets. This means that stock prices spend more time increasing in value than they do losing value.

Bull markets last anywhere from two years to around a decade, whereas bear markets are shorter and usually last a year or two and sometimes three.

5-year Market Chart

The 1930-1931 bear market is shown again with a shorter time-frame on a 5-year chart plotted as a weekly bar chart.

Chart 5yr: 1930-1931 Bear Market

The 1930-1931 bear market on a 5-year chart for the Dow Industrial Average plotted as a weekly bar chart.

The shorter time-frame provides more detail. As the chart shows, the 1930-1931 bear market started in October 1929 and lasted for over two years. The Dow Industrial Average lost around 90% during this period with the bear market ending in July 1932.

The 90% loss makes this the worst bear market in history. The Dow Industrial Average dropped from around 380 all the way down to around 40.

Market Chart: Rallies and Pullbacks

The 1930-1931 bear market is shown again with a 5-year line chart and two moving average indicators.

Chart MA: 1930-1931 Bear Market

The 1930-1931 bear market on a 3-year chart for the Dow Industrial Average plotted with a line chart and two moving average indicators.

The above line chart for the Dow Industrial Average shows a 52-week (long-term) and a 12-week (short-term) simple moving average.

The 52-week moving average (purple line) followed the bear market lower which bottomed in July 1932.

The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.

The stock market peaked in October 1929 (noted on the chart with the first RH - which stands for Relative High). The day that followed is now known as Black Thursday which lead to the worst financial crash in market history.

The initial plunge saw the Dow Industrial Average bottom in November 1929 (noted on the chart with the first RL - Relative Low).

The Dow Industrial Average then rallied with a bear rally until April 1930 (the 2nd RH on the chart). These rallies are commonly referred to as bear market rallies as they give investors a false impression that the bear market has bottomed and the next bull market started.

The market then continues its decent until December 1931 (3rd RL) where the Dow Industrial Average starts another bear rally which peaked in March 1931 (3rd RH).

With the bear rally finished, the market continued to decline until it finally bottomed out in July 1932 (4th RL) and this was the end of the 1930-1931 bear market.

The 1932-1936 bull market then followed which regained the worst of the market fall as bargain hunters stepped in.