The next Depression?

Posted by on March 23, 2009 @ 7:27 am in Economy & markets

Mark Hulbert (with some help from Jeremy Siegel) does a nice job correcting the record about how long it took for stock market investors to “recover” from the Great Depression.

While some are quick to point out that it wasn’t until 1954 that the Dow closed above its 1929 high, Hulbert argues that, in fact, adjusted for inflation and dividends, the Dow got back to its ’29 level after 8 years—which is still a long time, but not forever.

He also pokes some holes in the idea that we are currently going through Great Depression, Part Deux, by reminding us that the volatility people saw in the market in the ’30s was far higher than we’ve seen lately: According to his calculations, trailing 36-month market volatility reached an incredible 15.4% in mid 1933—so far, we’ve gotten to just 4.1% by the same metric.

The bottom line, of course, is that we all hope things don’t get a whole lot worse from here, but even “the big one” was survivable for those with an eye on the long term. And the fact is we really haven’t seen anything like the Great Depression since then.


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