United States bear market of 2007–2009
The US
The bear market was confirmed in June 2008 when the Dow Jones Industrial Average (DJIA) had fallen 20% from its October 11, 2007 high.[1][2][3][4][5] This followed the bull market of 2002–07 and was followed by the bull market of 2009–2020.
The DJIA, a price-weighted average (adjusted for splits and dividends) of 30 large companies on the New York Stock Exchange, peaked on October 9, 2007 with a closing price of 14,164.53. On October 11, 2007, the DJIA hit an intra-day peak of 14,198.10 before starting to screech.
The decline of 20% by mid-2008 was in tandem with other stock markets across the globe. On September 29, 2008, the DJIA had a record-breaking drop of 777.68 with a close at 10,365.45. The DJIA hit a market low of 6,469.95 on March 6, 2009, having lost over 54% of its value since the October 9, 2007 high[6][7] The bear market reversed course on March 9, 2009, as the DJIA rebounded more than 20% from its low to 7924.56 after a mere three weeks of gains.[8] After March 9, the S&P 500 was up 30% by mid May and over 60% by the end of the year.
Index levels
Date | Dow Jones[7] | % Chg.§ | S&P 500[9] | % Chg.§ | Nasdaq[10] | % Chg.§ | Notes |
---|---|---|---|---|---|---|---|
January 1, 2007 | 12,463.15 | — | 1,418.30 | — | 2,415.29 | — | |
October 9, 2007 | 14,164.53 | +13.65% | 1,565.15 | +10.35% | 2,803.91 | +16.09% | The day the DJIA and S&P 500 peaked. |
October 31, 2007 | 13,930.01 | −1.66% | 1,549.38 | −1.01% | 2,859.12 | +1.97% | The day the NASDAQ peaked. |
January 2, 2008 | 13,043.96 | −6.36% | 1,447.16 | −6.60% | 2,609.63 | −8.73% | |
June 27, 2008 | 11,346.51 | −13.01% | 1,278.38 | −11.66% | 2,315.63 | −11.27% | The day the bear market declared. |
September 12, 2008 | 11,421.99 | +0.67% | 1,251.70 | −2.09% | 2,261.27 | −2.35% | Levels before the bankruptcy of Lehman Brothers. |
November 4, 2008 | 9,625.28 | −15.73% | 1,005.75 | −19.65% | 1,780.12 | −21.28% | Election Day |
January 1, 2009 | 8,776.39 | −8.82% | 903.25 | −10.19% | 1,577.03 | −11.41% | |
January 20, 2009 | 7,949.09 | −9.43% | 805.22 | −10.85% | 1,440.86 | −8.63% | Inauguration of Barack Obama |
March 9, 2009 | 6,547.05 | −17.64% | 676.53 | −15.98% | 1,268.64 | −11.95% | The day the DJIA, S&P 500 and NASDAQ bottomed. |
October 9/31, 2007 to March 9, 2009 | −7,617.48 | −53.78% | −888.62 | −56.78% | −1,590.48 | −55.63% | Cumulative change (from peak to bottom) |
- §Values represent percent change from previous date listed in table.
Opinions regarding the cause
During the
Blaming the economy
In February 2007, a coming recession and bear market was predicted by Paul Lamont due to a growing debt bubble, the
High oil prices have impacted global economic growth, causing the Dow's 12th bear market since 1962 and the first since 2002 according to The Washington Post.[13]
Tom Petruno of the
Dick Meyer of NPR believes that "the idea of blaming one person for the downfall of the economy with a gross domestic product of about $14 trillion, powered by 300 million people and engaged in complex global commerce is nuts — whether that person is Bush, Obama, Alan Greenspan, Bernard Madoff, Osama bin Laden or the editors of opinions at The Wall Street Journal."[15]
Michael J. Panzner, author and 25-year Wall-Street veteran, says that "the real reasons behind the sell-off ... include the bursting of history's biggest
Blaming the George W. Bush administration
Former
In 2005, Congressman Ron Paul (R-Texas) said section 404 of the Sarbanes–Oxley Act (2002) which requires chief executive officers to certify the accuracy of financial statements caused capital flight away from the U.S. stock market.[19] Later in 2008, Paul said that the government bailouts of badly run corporations was rewarding bad behavior and punishing good behavior, and that it prevented resources from being allocated away from inefficient uses to more productive uses, and that this lowered the overall amount of wealth across the entire economy.[20]
In March 2009 White House budget director
Blaming the Barack Obama administration
A September 13, 2008, Wall Street Journal editorial prior to the election written by
As of early March 2009, the Dow Jones Industrial Average had fallen 20% since the inauguration of President Barack Obama (less than two months earlier), the fastest drop under a newly elected president in at least 90 years.
Finding a bottom
President Obama on March 3, 2009 said "What you're now seeing is profit-and-earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it," probably meaning
The DJIA hit a low on March 6, 2009 of 6,469.95. On that same day, a regulatory report indicated that the 5 biggest banks still had large risk exposure due to derivatives that could fail.[33]
Building a technical bull
On Tuesday, March 10, Vikram Pandit the CEO of Citibank, said that his bank has been profitable the first two months of 2009 and was currently enjoying its best quarterly performance since 2007. On March 12, Ken Lewis, CEO of Bank of America, declared that bank had also been profitable in January and February, that he didn't foresee the bank needing further government funds, and that he expected to "see $50 billion in 2009 pre-tax revenue". The announcements caused multi-day rallies with double-digit percentage gains for a number of stocks both in and outside of the banking industry.[34][35]
After only a month and a half in office, in a media blitz including press conferences, interviews and public appearances, President Obama,
Already rising for two weeks, following the Geithner announcement the DJIA had its fifth-biggest one-day point gain in history.[41] "Tim Geithner went from zero to hero in a matter of just a few days" and reported that Bank of America stock led banking stocks with 38% one-day gains.[42] On March 26, 2009, after just short of three weeks of gains which frequently defied the day's bad economic news, the DJIA rebounded to 7924.56. A rise of 21% from the previous low, this met the technical requirements to be considered a bull market.[43] A Wall Street Journal article declared, "Stocks are on their strongest run since the bear market started a year and a half ago as investors continue to debate whether the economy and the markets have finally stabilized".[44] Bloomberg noted the Obama administration's successes included the sale of $24 billion worth of seven-year Treasury notes and pointed out that March 2009 was the best month for the S&P 500 since 1974.[45]
Bonds
U.S. government bonds did well, especially longer terms. Yields dropped during this time period, part of a long-term bull market. High-grade corporate bonds and muni bonds also performed well. However, high-yield bonds had very bad performance, although they turned up coincident with the bull market in stocks.
Other markets
The Nikkei 225 average went from 18,262 on July 9, 2007 to 7,055 on March 10, 2009.[46] However, the yen also went up 24% compared with the U.S. dollar during this time.
The
See also
- Automotive industry crisis of 2008–2009
- Collateralized debt obligation
- Commodity Futures Modernization Act of 2000
- Derivative (finance)
- Glass–Steagall Act
- Global financial crisis of 2008–2009
- Late 2000s recession in the Americas
- Market trend
- Price of petroleum
- Subprime mortgage crisis
References
- Wall Street Journal, June 28, 2008
- ^ Michael M. Grynbaum Gloom Descends Over Wall Street Again The New York Times, June 27, 2008
- ^ Elizabeth Stanton Dow Average's Drop Into Bear Market May Signal Losses July 3, 2008. Archived July 10, 2008, at the Wayback Machine
- CNNMoney, June 27, 2008
- ^ Instant View: Dow industrials enter bear market territory Reuters, Jun 27, 2008
- ^ CNNMoney.com Market Report - Mar. 6, 2009
- ^ a b ^DJI: Historical Prices for Dow Jones Industrial Average
- ^ E.S. Browning (2007-03-27). "Bears Are Wary as Bull Returns". The Wall Street Journal. Retrieved 2009-04-03.
- ^ ^GSPC: Historical prices for S&P 500
- ^ ^IXIC: Historical prices for NASDAQ Composite
- ^ Laurie Kellman: Whose economy is it anyway? mlive.com/Associated Press, March 05, 2009
- ^ US Recession in 2007 - Third Leg of the Bear Market Likely, by Paul Lamont, The Market Oracle, February 5, 2007
- ^ Oil Prices Drive Stocks to Bear Market The Washington Post July 6, 2008
- ^ Tom Petruno Obama bad for stocks? It's not that simple Los Angeles Times, March 7, 2009
- ^ Dick Meyer Wall Street Blame Game: Tag, You're It, NPR, March 5, 2009
- Huffington Post, March 7, 2009
- ^ Robert Reich:Is Obama responsible for Wall Street's meltdown?, Salon, March 5, 2009
- ^ Justin Fox:A Look Back at Bush's Economic Missteps Time (magazine), March 08, 2009
- ^ Ron Paul:Repeal Sarbanes–Oxley!, Ron Paul speech to U.S. House of Representatives, April 14, 2005 Archived July 30, 2007, at the Wayback Machine
- ^ Ron Paul:The Bailout Surge, Ron Paul, November 24, 2008 Archived February 28, 2009, at the Wayback Machine
- ^ Stocks turn in worst performance for new president, Associated Press, March 10, 2009
- ^ "Grammar Police - the Current". Archived from the original on October 12, 2008. Retrieved March 27, 2009.
- ^ Phil Gramm and Mike Solon: If You Like Michigan's Economy, You'll Love Obama's, Wall St. Journal, September 13, 2008
- ^ "Text of the GRAMM-LEACH-BLILEY ACT". www.govinfo.gov. Retrieved 2022-03-18.
- ^ Paletta, Damian; Scannell, Kara (March 10, 2009). "Ten Questions for Those Fixing the Financial Mess". The Wall Street Journal.
- ^ Bajaj, Vikas; Grynbaum, Michael M. (September 30, 2008). "For Stocks, Worst Single-Day Drop in Two Decades". The New York Times. Retrieved May 26, 2010.
- ^ Study: Dow's Decline Is Fastest for a New President in Nearly a Century, Fox News, March 6, 2009 Archived March 7, 2009, at the Wayback Machine
- Wall St. Journal, March 3, 2009
- Wall St. Journal, March 6, 2009
- Wall St. Journal, March 6, 2009
- ^ Michael Mcauliff: Obama Says Buy Stocks Now: Good Deals There for Long-Term Investors U.S. News & World Report March 4, 2009
- ^ David Serchuk: When Will The Bear Market End? Forbes March 6, 2009
- McClatchy, March 9, 2009 Archived March 17, 2009, at the Wayback Machine
- ^ Citigroup Remarks Boost StocksNasdaq, March 11, 2009 Archived June 11, 2011, at the Wayback Machine
- ^ "SmarTrend(R) News Watch: Ken Lewis Says BofA Profitable in Beginning of 2009".
- ^ "Ben Bernanke's Greatest Challenge". CBS News.
- ^ "Federal Reserve Board - Financial Reform to Address Systemic Risk".
- ^ FDIC's Sheila Bair on 'bad bank' plan | Marketplace.org
- ^ "Responsible Homeownership". National Cable Satellite Corporation. December 17, 2008.
- ^ Geithner, Timothy (March 23, 2009). "My Plan for Bad Bank Assets". The Wall Street Journal.
- ^ a b Stark, Betsy (2009-03-23). "Dow Soars as Investors Back Bad Asset Plan". ABC News.
- ^ La Monica, Paul (2009-03-23). "Geithner enchants the markets". Money.CNN.com.
- ^ "The Associated Press: Dow hits 6-week high on relief over earnings". Archived from the original on March 30, 2009. Retrieved March 27, 2009.
- ^ Mckay, Peter A.; Rogow, Geoffrey; Curran, Rob (March 26, 2009). "Stocks' Momentum Keeps Building". The Wall Street Journal.
- ^ "U.S. Markets Wrap: S&P 500 Advances in Best Month Since 1974". Bloomberg. March 26, 2009. Archived from the original on January 23, 2009.
- ISBN 9781742468914.
Further reading
- Bartram, Söhnke M.; Bodnar, Gordon M. (December 2009). "No Place to Hide: The Global Crisis in Equity Markets in 2008/09" (PDF). Journal of International Money and Finance. 28 (8): 1246–1292. SSRN 1413914.