Remember when the Dow Jones Industrial Average broke 1,000 for the first time?! Of course you do. November 14, 1972, it was. After that milestone, the DOW was destroyed down to a mere 577 just 18 months later. It took eight years to get back to that high just over 1000, and 15 years to break 2000.
Now look what you’ve gone and done?! 45,000 today!
The DJIA had been steadily climbing, reaching milestones of 100 in 1906, 300 in 1928, 500 in 1956, 700 in 1961, and 900 in 1965.
In 1972, the U.S. economy was growing at a robust 7.2% real GDP growth rate. Corporate profits were surging, reflecting investors’ optimism about American business.
The election year of 1972 saw temporarily low unemployment and strong growth numbers, which contributed to market optimism.
The Fed, under Chairman Arthur Burns, implemented easy money policies aimed at generating full employment. Money supply growth was significant, M1, increasing from $228 billion to $249 billion between December 1971 and December 1972.
The market structure was changing, with a growing influence of institutional investors. By 1972, institutional investors such as mutual funds, pension funds, and insurance companies accounted for 60 percent of the volume traded on the New York Stock Exchange.
Additionally, in 1971, Nixon broke the last link to gold, turning the American dollar into a fiat currency. The “Nixon Shock,” was part of the collapse of the aging Bretton Woods system.
So, where do we go from here?!
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