by David Haggith, The Great Recession Blog:

Today was the greatest crash in Wall Street history by one measure, and took down many other milestones. The Dow plunged 2,012 points in its largest single-session drop on record! Percentage-wise it was down 7.8%, which still knocked out decades of lows, leading to “Black Monday” being the hot search term on Google today as people sought a comparison worthy of this Monday crash.

For comparison, the 1929 event looked like this:

The stock market crash of 1929 – considered the worst economic event in world history – began on Thursday, October 24, 1929, with skittish investors trading a record 12.9 million shares. On October 28, dubbed “Black Monday,” the Dow Jones Industrial Average plunged nearly 13 percent. The market fell another 12 percent the next day, “Black Tuesday.” While the crisis send shock waves across the financial world, there were numerous signs that a stock market crash was coming.

History.com

The times leading up to that crash sound like the past year:

After 1922, the stock market had increased by nearly 20 percent each year until 1929…. People bought stocks with easy credit. During the 1920s, there was a rapid growth in bank credit and easily acquired loans. People encouraged by the market’s stability were unafraid of debt.

The bear is at the door

The total percentage drop in just five days in 1929 was 22%, but the Dow was already down 30% from its September 3 high. Today’s market is down 19% in three weeks from its high, but we don’t know how far it has left to fall. Maybe it will get another dead-cat bounce like the last one and will take longer than just tomorrow to go full bear:

Or maybe the news after closing that all of Italy is now quarantined will rock its boat all over again. There we were floating along the river, and we came to a waterfall, plunged over the edge bounced up over a rapid and plunged over a second waterfall today. Let’s get out of the water and assess the damage.

As for the other indices drop today …

…the S&P 500 lost 7.6%, and the Nasdaq Composite fell 7.3%. Each index … registered its largest one-day loss since the financial crisis in 2008….

[That the] coronavirus caused U.S. stock-market decline of nearly 20% from the February peak doesn’t change the grim long-term outlook for U.S. equity returns, says Rob Arnott, founder of the asset manager Research Affiliates.

Barron’s

“Still grim” means more falls to come in that manager’s opinion.

The stock market is less than one percentage point from a full-bear retreat from the heady days when it I called it “the most perilous market in history.” In 2018, the stock market took three months to become a bear market in all but one index. Now it has almost made that dive in three weeks. Remember how bad that autumn felt. Well this event went the same distance in about a quarter of that time.

Particularly notable on this journey over the falls was that epochal moment when the Fed gave the market a double-dose of the interest cuts it thought the market wanted, and for the first time the market did the opposite of what the Fed wanted and plunged again. Then, last night the Fed increased its repo operations, which have been providing a form of clandestine QE the market craved, and the market took its biggest point drop ever.

So, the most remarkable thing about this trip over the twin waterfalls is that, with great impact, it marks that time in history I have said since 2012 will most certainly come when all the Fed’s ammo has gone so far over and down the bell curve of diminishing returns that each action now brings negative results, instead of just smaller and smaller positive results.

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