by Gary Alexander

June 27, 2023

We’ve seen a pretty good June in market indexes this month – until the dawn of summer last week:

Unfortunately, today’s date, June 27, plus June 26-29, has seen the beginning of some terrible times on Wall Street, mostly long ago. First, on June 27, 1857, The New York Herald foresaw dark days ahead.

“What can be the end of all this but another general collapse like that of 1837, only upon a much grander scale? Government spoilation, public defaulters, paper bubbles of all descriptions, a general scramble for Western lands and town and city sites, millions of dollars, made or borrowed, expended in fine houses and gaudy furniture; hundreds of thousands in silly rivalries of fashionable parvenus, in silks, laces, diamonds and every variety of costly frippery are only a few among the many crying evils of the day.”

– Editorial by James Gordon Bennett, founder and publisher of The New York Herald, June 27, 1857

My, these editors loved to sling purple prose in those days, but the financial press has always loved spinning scary scenarios, spawning an army of Doomsday prophets. In 1857, with the new, widespread use of the telegraph (the Internet of the day), the panic of dropping stock prices spread faster than ever, and when the gold-bearing steamer S.S. Central America sank in a September hurricane off the Carolina coast, the promised salvation of a major gold shipment drove many New York banks into bankruptcy – but The Stock Trader’s Almanac says the market rose 14.3% in 1858 and +160% from 1858 to 1864.

Moving along in this day in history:

On June 27, 1893, the Panic of 1893 began, when silver fell from 92-cents to 77-cents in one week. The proximate cause was the abandonment of silver coinage by India, a pro-silver nation. The U.S. silver dollar sank on world markets to 60-cents. The #1 subject in the minds of traders was the possible repeal of the Sherman Silver Purchase Law of 1890, forcing an unrealistic silver gold ratio of 16-to-1 ounces of gold, in a bi-metallic standard. This was unsustainable, so America entered a deep Depression in 1894. (However, the new Dow Jones index soared under McKinley’s Gold Bugs, rising 73.6%, 1896 to 1900.)

On June 29, 1906, the passage of the Hepburn Act empowered the Interstate Commerce Commission (ICC) to investigate and set railroad rates. President Roosevelt, in signing the Act, called it a major victory against the “malefactors of great wealth.”  When a President calls business leaders “malefactors,” stocks tend to fall. The Dow Jones Industrial Index fell 48.5% from January 1, 1906, to November 11, 1907. However, the Dow industrials then rose by a sparking 46.6% in 1908, and another +15% in 1909.

On June 28, 1914, The Great War was launched when Serbian nationalist Gavrilo Princip fatally shot Archduke Franz Ferdinand, heir to the Austro-Hungarian empire, in Sarajevo, Bosnia. Soon, all European markets were closed from the end of July for the length of the war, and the seeds of the next World War were sewn exactly five years later, on June 28, 1919, with signing of the Treaty of Versailles, laying crippling reparations on Germany. U.S. President Woodrow Wilson won a Nobel Peace Prize for his efforts there, but British economist John Maynard Keynes accurately predicted (in “The Economic Consequences of the Peace,” 1919) that seeking vengeance at Versailles would lead to war, not peace.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

A Morningstar graph of 150 years of market shocks, 1870-2020: You can hardly notice the Panics of 1893 or 1907

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

What was not noticeable at the time – only in hindsight – is that these early summer swoons provided a slingshot forward in the fall, or the next year. The Panics of 1893 and 1907 are small blips in history, and in World War I the Dow more than doubled from June 30, 1914 (at 52) to November 21, 1916 (at 110).

All of these previous panics came under the gold standard, before the Federal Reserve found its footing, but this final week in June also brought some memorable market dips and recoveries in more recent years:

Mid-Year Corrections Since 1940 Also Recovered Rapidly

In an eerie echo of what’s happening in Russia this week, on June 29, 1941 – 22 years after Versailles, Hitler broke his Non-Aggression Pact with Stalin and sent German divisions toward Leningrad, Moscow, and Kiev (Ukraine). The initial invasion came on June 22, but on this date, Riga, Latvia fell. (The Dow fell in late 1941, but the Dow rose from a low of 92.92 on April 28, 1942, to 212.50 on May 29, 1946.)

On Monday, June 26, 1950, the Dow fell by a staggering 10.44 points (-4.7%), to 213.91, the largest one-day drop since 1937, and the worst decline we would see until 1962 (below). The cause was the start of the Korean War on June 25. On June 29, President Truman declared a naval blockade. For the week of June 26-30, the Dow fell 15.24 points (-6.8%), to 209.11, the worst weekly drop since the 1930s, but what happened next? The market soared during the Korean War years, before Ike ended the hostilities in 1953.

On June 26, 1962, the Dow fell to 535.76, mercifully reaching the end of a steep, six-month 36% bear market (part of the “U.S. Steel sell-off”), but it was also the start of an 11-month (+51%) bull market.

On June 26, 1974, Bankhaus Herstatt, one of Germany’s largest private banks, collapsed—the first major bank failure since Western currencies began to float in 1973. On June 30, the famous beach scene from Steven Spielberg’s hit movie, “Jaws,” was filmed. A crowd of 400 screaming, panic-stricken extras in bathing suits ran from the surf – over and over again – until they were panicked enough to suit Spielberg. I like to imagine that those 400 extras might have been stock traders, because the 1974 bear market began in earnest that day. The Dow fell from 806 on July 1 to 584 on October 4th (down 27.5% in the quarter).

What next? From late 1974 to September 1976, the S&P 500 rose 73% and the Dow rose by over 75%.

So, when the market gets you down, read history for perspective. Then, today’s news won’t look so bad.

Next week, on America’s 247th birthday, I want to share some insights from some superb documentaries about American history I have been evaluating for the Anthem Film Festival for the upcoming Freedom Fest, to be held in Memphis, July 12-15. Louis Navellier will speak there as part of two high-level global investment panels, along with Steve Forbes, Mark Skousen, John Mauldin, Alex Green, and others. I will miss this Freedom Fest for the first time since its founding, but I am still one of the senior judges for the Film Festival and will bring you highlights of some of the best films with investment angles next week.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Fed Skip May Actually Be a Stop

Sector Spotlight by Jason Bodner
All Roads Lead to Profits…in Time

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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