The1973–1974 stock market crash caused abear market between January 1973 and December 1974. Affecting all the majorstock markets in the world, particularly the United Kingdom,[1] it was one of the worst stock market downturns since theGreat Depression, the other being the2008 financial crisis.[2] The crash came after the collapse of theBretton Woods system over the previous two years, with the associated 'Nixon Shock' and United States dollardevaluation under theSmithsonian Agreement. It was compounded by the outbreak of the1973 oil crisis. It was a major event of the1970s recession.
All the main stock indices of the futureG7 bottomed out between September and December 1974, having lost at least 34% of their value innominal terms and 43% inreal terms.[1] The recovery was a slow process.West Germany's market was the fastest to recover, returning to the same level by June 1985.[1] The United Kingdom returned to the same market level by May 1987, but this full recovery lasted for only a few months and ended with theBlack Monday crash of 1987. The United States returned to the same market level by August 1993, over twenty years after the 1973–74 crash began.[1]
In the 694 days between 11 January 1973 and 6 December 1974, theNew York Stock Exchange'sDow Jones Industrial Average benchmark suffered the seventh-worstbear market in its history, losing over 45% of its value.[2] The year 1972 had been a good year for the DJIA, with gains of 15% in the twelve months, and 1973 had been expected to be even better, withTime magazine reporting just 3 days before the crash began that it was 'shaping up as a gilt-edged year'.[3] In the two years from 1972 to 1974, theAmerican economy slowed from 7.2% real GDP growth to −2.1% contraction, while inflation (byCPI) jumped from 3.4% in 1972 to 12.3% in 1974.[1] The Dow reached its lowest level, 577.60 points, on December 6, 1974.[4]
The effect was worse in the United Kingdom, particularly on theLondon Stock Exchange'sFT 30, which lost 73% of its value during the crash.[5] From a rate of 5.1% real GDP growth in 1972, the UK went intorecession in 1974, with GDP falling by 1.1%.[1] At the time, the UK's property market was going through a major crisis, and a secondary banking crisis forced theBank of England to bail out a number of lenders.[6] In the United Kingdom, the crash ended after the rent freeze was lifted on 19 December 1974, allowing a readjustment of property prices; over the following year, stock prices rose by 150%. The definitive market low for the FT30 Index (a forerunner of theFTSE100 today) came on 6 January 1975, when the index closed at 146 (having reached a nadir of 145.8 intra-day). The market then practically doubled in just over 3 months.[6] However, unlike in the United States, inflation continued to rise, to 25% in 1975, giving way to the era ofstagflation. The Hong KongHang Seng Index also fell from 1,800 in early 1973 to close to 300.[7]
Out of the 20 largest percentage gains and losses in the DJIA, none occurred during this time period.[8]
All the main stock indices of the futureG7 bottomed out between September and December 1974, having lost at least 34% of their value innominal terms and 43% inreal terms.[1] In all cases, the recovery was a slow process. AlthoughWest Germany's market was the fastest to recover, returning to the original nominal level within eighteen months, it did not return to the same real level until June 1985.[1] The United Kingdom did not return to the same market level until May 1987 (only a few months before theBlack Monday crash), whilst the United States did not see the same level in real terms until August 1993, over twenty years after the 1973–74 crash began.[1]
The Hong KongTVB seriesThe Greed of Man storyline revolves around the market crash.[citation needed]