16
CHAPTER
MARKET VOLATILITY
The word crisis in Chinese is composed of two characters: the first, the
symbol of danger,... the second, of opportunity.A comparison of the Dow Jones Industrial Average from 1922 through
1932 and 1980 through 1990 is shown in Figure 16-1. There is an uncanny
similarity between these two bull markets. In October 1987, the editors
of the Wall Street Journal, looking at the then-incomplete version of the
chart shown in Figure 16-1b, felt the similarity was so portentous that
they printed a similar comparison in the paper that hit the streets on
Monday morning, October 19, 1987. Little did they know that that day
would witness the greatest one-day drop in stock market history, ex-
ceeding the great crash of October 29, 1929. Ominously, the market con-
tinued to trade very much like 1929 for the remainder of the year. Many
forecasters, citing the similarities between the two periods, were certain
that disaster loomed and advised their clients to sell everything.
But the similarity between the 1929 and the 1987 episodes stopped
at year’s end. The stock market recovered from its October 1987 crash,
and by August 1989, it hit new high ground. In contrast, two years after
the October 1929 crash, the Dow, in the throes of the greatest bear mar-
ket in U.S. history, had lost more than two-thirds of its value and was
about to lose two-thirds more.269Copyright © 2008, 2002, 1998, 1994 by Jeremy J. Siegel. Click here for terms of use.