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The Dow Jones and World War II
In light of Russia’s move to annex Crimea, and with further “provocations” surely to come, I have written in my “Week in Review” columns that we should be rereading William Shirer’s classic “The Rise and Fall of the Third Reich” for guidance as to Vladimir Putin’s next potential moves.
But how did the stock market react back in the days prior to U.S. entry into World War II? It’s been over a decade since I reviewed the numbers.
Following are some key dates and U.S. market data points.
9/29/38 – Munich Agreement...Czechoslovakia forced to cede Sudetenland to Nazi Germany. Dow closes at 137.16. 9/30...141.45 (agreement was dated 9/29 but actually signed 9/30).
3/16/39 – Hitler marches into Czechoslovakia. If we didn’t take him seriously before, we had to now. The Dow closes that day at 147.54. 3/17...143.81.
9/1/39 – The Wehrmacht blitzes Poland. Dow closes at 135.25. 9/2...138.09. After two days off for Labor Day (in these days the stock market was open Monday thru Saturday), the market rallies 7% to close at 148.12 (9/5). Unbelievable how naïve we were. By 9/12 the market hits 155.92. Warsaw falls on 9/27, the Dow closes at 153.09.
Market treads water over the winter as the world knows that Hitler will eventually make a move in the West. But first....
4/9/40 – Nazis land in Denmark (which immediately surrenders) and then quickly move into Norway. Dow is at 150.31.
5/9/40 – The Wall Street Journal opines that an invasion of Holland “would awaken fears that England was about to be attacked.” The next day, 5/10, two things happen. Winston Churchill becomes prime minister of Great Britain. Hitler swarms into the Netherlands, Belgium and Luxembourg on his way to France. The Dow Jones was at 148.17 on 5/9...144.77 on 5/10 (a 2.3% decline). [Remember that with the time difference between the U.S. and Europe there was usually plenty of time for the U.S. market to react the same day.] 5/11...Dow closes at 144.85.
5/12/40 was a Sunday. On 5/13, upon further reflection, the markets realized that all of this bloody action in Europe (coupled with Japan’s Asian adventures) probably wasn’t a good thing. The Dow falls 5% to close at 137.63. A few days later a Journal market column reports that “while numerous practical-minded individuals on Wall Street take the view that more intense warfare will be stimulating to our industries, they recognize the dangers inherent in a swift German victory.” By 5/24, the Dow sits at 113.94, a 23% decline in two weeks (or about 3800 Dow points at today’s levels).
On 6/3 and 6/4, the evacuation of 338,000 British and French troops from Dunkirk is under way. The Dow finishes at 115.79 on 6/4. 6/14 the Germans take Paris – the Dow sits at 122.27.
The Battle of Britain takes place mostly between 7/31/40 (Dow 126.14) and 10/31/40 (Dow 134.61).
6/22/41 – The Nazis attack the Soviet Union. The market is closed. On 6/23/41 the Dow closes at 123.97 (up from 122.51 on 6/21).
12/6/41 – Dow sits at 116.60.
12/7/41 – Pearl Harbor, a Sunday.
12/8/41 – Dow closes at 112.52 (off 3.4%).
By 4/28/42 the Dow has fallen to 92.92. From its peak of 155.92 on 9/12/39, the market has declined 40%. Or, looked at another way, 39% from a level of 151.29 on 4/8/40.
[Source for two quotes, Wall Street Journal article written by Deborah Lohse, 1996.]
Wall Street History will return in two weeks.