Why Stocks Are Winking at Wall Street
Picture this: You’re staring at the ticker, heart beating, thinking the world’s economy is about to hit the skids. Then, out of nowhere, the markets start dancing like Saturday night Fever. That’s the vibe we’re experiencing right now—a surge that’s turning heads, rugs, and maybe a few eyebrows.
The Great Jump Back
- In the U.S., the S&P 500 jumped a whopping 28 % from its March 23 low, since the market plummeted more than 30 % off the Feb 19 high.
- Singapore’s Straits Times Index displayed a 13 % rally from its low, crowing back from a 32 % drop off its yearly peak in January.
All of this is happening while the economy’s “sizzling” on the curve of contraction, thanks to COVID‑19. People are scratching their heads, puzzling over why Wall Street seems to be doing a happy dance while Main Street looks like a sad clown.
Are We Heading for Another Crash?
Let’s face it: nobody has a crystal ball to predict what’s next. Even the market’s gurus are left scratching their heads, flipping through blogs, scrolling forums, and throwing away coffee. The bigger question: why is there such a gap between the rich world of trading floors and the regular folks’ economy?
Enter the 1907 Flashback
Last week, I stumbled upon an intriguing academic paper from December 1908 discussing the Panic of 1907. At the time, the panic erupted in October, triggering economic chaos that’s largely forgotten today. This 1907 crisis actually sparked The Federal Reserve—America’s financial nervous system—back in 1913.
Take a look at three snippets from that report that paint a bleak picture of that era’s economy:
- “America’s financial rivers ran dry.” Banks collapsed, investors fled, and the stock market sank like a stone in a sea of uncertainty.
- “Workers stood at the crossroads of joblessness.” The job market gripped a grim silence, and every “hopeful” advert seemed to read like a polite letter of resignation.
- “Spokes and shops sold for a fraction of their value.” All so, the business empire that had once been gleaming now blinked like a burnt-out neon sign.
Ironically, stocks did better in that era too—except they bounced back from a different kind of cliff. But the lesson remains: markets can do a trick even when the economy has a face‑model about to break.
Bottom Line—Feel Good News
While the glitch is still puzzling, at least there’s hope shining through. Past events, from the ‘Wild West’ panic of 1907 to the current revival, show that the market has a knack for bouncing back, even when the economy looks like a bad sitcom plot. Until the next episode, let’s keep our eyes on the ticker, with a grin that says: “We’ve got this.”
This is the first set (emphasis is mine):
Was the Panic of 1907 the Big Crash Everyone Talks About?
Think back to 1907—picture a financial bull run, only to have the market slam down faster than a kid with a basket of eggs. What economists call a commercial panic erupted, and it was no light‑weight bruiser. It’s the kind of crisis that makes history books say, “Yep, that one was a monster.”
The Five Fingerprints of a Big Panic
- Bank Blankness: Banks froze cash, so people couldn’t get money without a paper shred of a note. Credit lines went on an involuntary vacation—essentially, no loans, no buying, no fun.
- The Great Run: Panic sold the press, and people started pulling billions out of their accounts. Imagine a wave of people sprinting to the banks like they were rehearsing for a marathon—only the lanes were made of vaults.
- Gold Runs Like Backstage Passes: Since the country couldn’t tackle its own gold needs, it hopped to foreign markets to borrow or buy gold the instant it was needed. Gold became the VIP of the liquidity crisis.
- Factory Fights: Factories shut down en masse because there was no credit to keep the wheels turning. Even if the machine would run, the punch line was that consumers were about to quit buying, so the businesses decided it was better to stop than risk trashing their lines.
- The Demands Gone Quiet: Demand swam away in half‑a‑century waves—consumer buying decided to be invisible. The quiet lasted months (some say years) before people started to re‑appear.
Now, did the 1907 crash only pick up a couple of these? Nope—every single one was on the scene, each one amplifying the next. That’s what makes it the first‑magnitude panic we’re still talking about in modern economic history. The 1907 crisis didn’t just shake the markets; it turned the whole economy into a circus—banks as clowns, factories as the acts, and consumers as the knifemasters, all bowing to the chaotic rhythm.
Here’s the second set:
How the 1908 Boom‑Bust Left America Feeling Flat
Picture this: the United States, 1908, a year that looks a lot like a roller‑coaster that’s stuck at the middle rung. Trade, production, and even the mood of the markets were way lower than the previous year – and that’s just the “low” part.
Imports Took a Downward Spin
- Imported goods fell by a whopping US$319 billion – or US$450 billion in local currency – which is over 26% drop from 1907.
- Exports weren’t much kinder, slipping down US$109 billion despite shipping a massive wheat haul to Europe.
Industrial Power – A Story of Drop‑and‑Rise
After the 1907 panic hit, the nation’s industry looked more like a sobbing teenager than a powerhouse—it had no intention of returning to normal. Let’s break it down:
- At the start of 1908, business in many sectors was only 28% of the 1907 volume.
- By midsummer, it had creeped up to 50% – a win, but still a half‑the‑old‑stand‑still.
- Iron furnace output on Jan 1 was a mere 45% of the same day’s 1907 output.
- By Nov 1, iron production ticked up to 74% of 1907’s figure.
- September’s unfilled orders at the United States Steel Corp were a modest 43% behind the boom year of 1906, showing that demand was still slack.
The Stock Market’s Weird Dance
Armed with economist Robert Shiller’s data, we can trace the market’s mood swings from 1907 to 1917:
- Most of 1907 was a slump; the market hit its lowest point in November after dropping 32% from January.
- Come December 1907, it bounced and continued climbing through 1908 – a “never look back” streak that stretched for a next nine years.
So even though the economy was crying in 1908, the shares were laughing their way to the top. That’s the classic Wall Street vs. Main Street disconnect – and one we’re seeing all the way up to 2020.
What Does This Tell Us?
We’re at a point where the market’s optimism can feel wildly distant from the bumps the everyday folks feel. The 1908 saga reminds us that markets can look ahead while real life stays stuck in the present. We can’t predict the next move; all we can do is provide more context and keep an eye on the bigger picture.
Bottom line: History’s a roller‑coaster that repeats itself, but the seat of the ride is always chaotic. Stay tuned – the next loop could be just around the corner.
