On this day in stock market history ...
For 25 years, the Dow Jones Industrial Average (DJINDICES: ^DJI ) looked up at 381 points, an all-time high set on Sept. 3, 1929. For 25 years -- through the worst depression in modern history, through six presidential elections, a worldwide abandonment of the gold standard, the rise of fascism, a world war, the worldwide readoption of the gold standard at Bretton Woods, five cyclical bear markets, and four cyclical bull markets sandwiched into the most devastating secular bear market in history -- investors looked up at 1929. They wished they'd seen it coming. They wondered when they'd finally get past it. They saw the rest of the world moving on, no longer obsessed with tickers and trades.
And then, on Nov. 23, 1954, after 25 grueling years, the Dow finally put 1929 behind it. Closing the day at 382 points, the Dow tacked on just enough growth to push the all-time ceiling a little higher. The New York Stock Exchange set its own record for trading breadth that day, as 1,271 different stocks exchanged hands.
The New York Times reported on the importance of stock selection for index progress:
Standard & Poor's (SNPINDEX: ^GSPC ) [at the time a value-weighted index of 90 stocks] index went over the top last spring but the New York Times combined average is still 61.46 points below it. ... There are only 17 companies in the Dow Jones Index today of the 30 that comprised it in 1929. There have been 25 substitutions. Harold Clayton of Hemphill, Noyes & Co. ... recently pointed out that if the 1929 compilers of the Dow Jones average had used the same stocks that are used today, their industrial index would now be 40% over the top.
The reason for the rise was as simple as could be, according to the Chicago Daily Tribune: "Brokers, whose offices are crowded these days, attributed much of the buying to the apparent conviction of traders and the public that stocks are going higher and higher."
The Dow did indeed continue to go higher and higher. It avoided a bear market until it peaked at 521 points in April 1956, but through all the subsequent bear markets that followed, it would never again drop beneath the 1929 peak of 381 points. The Great Depression had been put in the rearview mirror for good.
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