CandleFocus Glossary Editor
Black Tuesday is the term used to refer to the single day stock market crash of October 29th, 1929. The day saw the value of the Dow Jones Industrial Average (DJIA) drop precipitously, particularly during the closing hour of trading. It is seen as the beginning of a decade of economic depression otherwise known as the Great Depression, which did not end until the outbreak of World War II.
The causes of the crash are cited to have been the sustained bubble of over-leveraged stock market investment, throughout the Roaring Twenties in America, combined with global protectionism policies, which had caused a great deal of investments going into speculation rather than solid economic growth. In the months prior to Black Tuesday, the stock market had been gradually declining, and October 24th saw the Bank of United States collapse, which was the largest bank in the country at the time, leading to increased panic and speculation.
During the trading session on the 29th October 1929, almost 12.9 million shares were sold, which at the time was a record for the New York Stock Exchange. By the end of the day, the Dow Jones Industrial Average had plummeted by nearly 13% from its already weakened condition, which was followed by large declines in other US exchanges. This resulted in massive losses for small investors, while many corporations went bankrupt as they were unable to cope with the crisis.
The effects of Black Tuesday were felt worldwide, with many other countries seeing similarly catastrophic affects to their stock markets, except for Japan. In the United States, the Great Depression lasted until the beginning of World War II, with increased poverty, unemployment, and economic distress. It drastically changed the country's economic system and its trade policy, leading to new government policies for economic recovery and an increased focus on regulating stocks.
Although Black Tuesday is the most famous stock market crash in history, the day marks an important reminder of the fragility of the financial markets and serves as a warning for the future. With global economies so intertwined and the level of complex financial instruments available, it is important that regulatory controls are effective, to ensure that such devastating crashes are avoided whenever possible.
The causes of the crash are cited to have been the sustained bubble of over-leveraged stock market investment, throughout the Roaring Twenties in America, combined with global protectionism policies, which had caused a great deal of investments going into speculation rather than solid economic growth. In the months prior to Black Tuesday, the stock market had been gradually declining, and October 24th saw the Bank of United States collapse, which was the largest bank in the country at the time, leading to increased panic and speculation.
During the trading session on the 29th October 1929, almost 12.9 million shares were sold, which at the time was a record for the New York Stock Exchange. By the end of the day, the Dow Jones Industrial Average had plummeted by nearly 13% from its already weakened condition, which was followed by large declines in other US exchanges. This resulted in massive losses for small investors, while many corporations went bankrupt as they were unable to cope with the crisis.
The effects of Black Tuesday were felt worldwide, with many other countries seeing similarly catastrophic affects to their stock markets, except for Japan. In the United States, the Great Depression lasted until the beginning of World War II, with increased poverty, unemployment, and economic distress. It drastically changed the country's economic system and its trade policy, leading to new government policies for economic recovery and an increased focus on regulating stocks.
Although Black Tuesday is the most famous stock market crash in history, the day marks an important reminder of the fragility of the financial markets and serves as a warning for the future. With global economies so intertwined and the level of complex financial instruments available, it is important that regulatory controls are effective, to ensure that such devastating crashes are avoided whenever possible.