What Is Black Tuesday?
Let me explain Black Tuesday directly: it happened on October 29, 1929, when the stock market took a sharp dive, hitting the Dow Jones Industrial Average especially hard amid massive trading volume. The DJIA dropped 12%, which stands as one of the biggest one-day falls in stock market records. Over 16 million shares changed hands in that panic-driven sell-off, and it put an end to the Roaring Twenties while dragging the world economy into the Great Depression.
Key Takeaways
- Black Tuesday points to the steep decline in the Dow Jones Industrial Average on October 29, 1929.
- It kicked off the Great Depression, which dragged on until World War II started.
- Factors behind it included excessive debt for stock buys, worldwide protectionism, and economic slowdown.
- The event reshaped America's economic framework and its approach to trade.
Understanding Black Tuesday
Black Tuesday drew the curtain on the post-World War I economic surge and ushered in the Great Depression, which didn't let up until World War II. After the war, the U.S. stood as a dominant economic force, but it prioritized building its own industries over global teamwork. High tariffs got slapped on imports to shield emerging sectors like automobiles and steel. As European farming bounced back from wartime shutdowns, agricultural prices dropped, and more tariffs aimed to protect U.S. farmers. Still, their earnings and farm values sank, speeding up the shift to cities for industrial jobs.
The Roaring Twenties boom rode on the belief that the 'war to end all wars' had secured endless prosperity. From 1921 to the 1929 crash, stock prices climbed nearly fivefold as everyday people jumped into the market, many for the first time. Brokers lent heavily, sometimes covering two-thirds of the stock cost, using the shares as collateral. Income gaps widened too, with the top 1% holding about 19.9% of the nation's wealth.
The 1929 Crash
By mid-1929, the economy showed cracks, with fewer home and car buys as debt weighed on consumers. Steel output dipped as well.
Protectionism
A couple of years prior, Europe's agricultural output started recovering from World War I, cutting into American farmers' overseas markets. Congress responded with bills hiking tariffs on imports, including farm goods, to prop up prices. Then came word of strong European harvests, boosting supply and driving down commodity prices, which shook the markets. Congress doubled down with the Smoot-Hawley tariff act, raising duties not just on agriculture but across industries. Other nations followed with their own protectionist moves. The result crushed global trade, which fell 66% between 1929 and 1934.
The Fed
In August, the Federal Reserve let its New York branch hike the discount rate, prompting central banks globally to do the same. On September 20, the London market tanked after investor Clarence Hatry got jailed for fraud. Markets swung wildly for the next month.
The Crash
These elements combined to trigger the stock market collapse. On Black Thursday, October 24, it opened down 11%. Bank leaders tried to stabilize by snapping up big stock blocks, and it closed down only 6 points. But panic and margin calls hit hard on Black Monday, the 28th, with a 13% drop, followed by another 12% on Black Tuesday amid unprecedented volume. Even efforts from financiers and industrialists couldn't stop the selling wave. The market shed over $30 billion from September to November.
It bottomed out at 41.22 on July 8, 1932—an 89% plunge from the September 3, 1929, peak of 381.17. GDP shrank more than 36% from 1929 to 1933. Unemployment soared past 25% as boom-time hires got cut loose. Things only started improving after President Franklin Delano Roosevelt took office. He ended the Smoot-Hawley tariffs and set up the Reciprocal Trade Agreement Act in 1934. The market didn't hit a new high until November 23, 1954.
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