The Rise and Fall of Equities

A chronological look at the volatile swings in the equities market from the 1930s to 2009.

1930s: Stock investing is the playground of a few rich Americans. Between September 3, 1929, and April 28, 1942, the Dow Jones industrial average loses 10.6 percent. In 1932 the DJIA has fallen 89 percent from its 1929 high. The Dow doesn’t return to its high until 1954.

1970s: The U.S. is plagued by recessions, high oil prices and inflation. Between February 9, 1966, and August 12, 1982, the DJIA loses 1.5 percent. From May 1972 through March 1980, totals in stock mutual funds fall 42 percent.

1980s: Individual retirement accounts and defined contribution plans push individuals into the market. The bull market takes off in 1982.

1990s: The stock market continues its climb, with technology stocks taking the lead. Tech stocks become cocktail party fodder. The market peaks in 2000. Investors add $1 trillion to mutual funds. Between 2000 and 2002 the DJIA falls 38 percent.

2003–2007: Another bull market, with the market peaking in October 2007. By now half of American households own stocks.

2008: A devastating year for stocks. The credit crisis slowly unfolds, then in September, Lehman Brothers Holdings files for bankruptcy, American International Group is taken over by the government, and Merrill Lynch & Co. is gobbled up by Bank of America Corp. Investors withdraw a whopping $169 billion from U.S. and international stock mutual funds, and the Standard & Poor’s 500 index tumbles 37 percent.

2009: Even after a fierce stock market rally, bond mutual funds are the big draw for investors. By the end of October, investors pour a total of $314 billion into all funds. But U.S. stock funds lose $4.4 billion, as bond funds rake in $297 billion.

Institutional investors are also becoming disgruntled. According to Watson Wyatt, managers of corporate defined benefit plans had decreased their equity allocations to 50.7 percent as of August 15, compared with 57.5 percent as of June 30, 2008. Carl Hess, global director of investment consulting at Watson Wyatt, expects that number to decline to 47.8 percent in 2010 — a full 10 percentage point drop from the middle of 2008. Joseph Amato, president of Neuberger Berman, sees the trend playing out at his firm as well, among both high-net-worth investors and institutions. “The violent swings in the equities market, from deep bear to an unbelievable rally this year, have left deep marks on people,” says Amato.