The Next Time The World Is Ending

The next time the financial and world news has you thinking the world is ending, take a deep breath and look at this long-term chart of the Dow. Then, using only the price action as a guide, identify the following events:

  1. Creation of the Federal Reserve
  2. Beginning and end of WWI, WWII, Korean War, Vietnam War.
  3. Global deadly flu epidemic
  4. 5 US banking crises
  5. Enactment of the New Deal
  6. Abandoning the gold standard (in 2 phases)
  7. Wage and price controls enacted and repealed (several times)
  8. 9/11 attacks
  9. Highest marginal tax rate exceeds 90% (can’t get closer to the end than that)
  10. Cuban missile crisis
  11. Arab oil embargo
  12. Widespread riots in Detroit and LA
  13. Assassination of the President
  14. President resigns
  15. Fall of the Berlin Wall
  16. Too many sovereign debt crises to mention

The point is, over the long-term it’s very hard to tell when even the biggest news events happened based on the price action. Almost none of them coincided with a significant market top, and many of the biggest moves began with a [quiet] whimper rather than a bang. What does the news tell you? Not much. What matters is how people react to it.


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