Black Tuesday, 29 October 1929, marked the start of the Great Depression in the United States. On this day, stocks traded on the New York Stock Exchange lost 13% of their value in a single day. This makes Black Tuesday the second largest negative percentage change in stock market history, beaten only by the nearly 23% loss which occurred on Black Monday in 1987. It would take 25 years for stocks to regain their pre-1929 values in the United States. Black Tuesday was not just a dark day for the American economy, as it was accompanied with similar stock market crashes in stock exchanges all over the world, triggering a global depression which turned the 1930s into a very grim decade in many regions.
The events of Black Tuesday were preceded by the “Roaring '20s,” a decade marked with increased optimism, free spending, and excess. During the 1920s many people believed that the value of the stock market could only go up and behavior among investors in the stock market became increasingly risky. In October 1929, however, the stock market began to experience extreme volatility and investors became nervous. On Black Tuesday, 16 million shares were moved, a volume of trading nearly four times that of normal, and in fact stocks were being traded so quickly that the ticker could not keep up.
This stock crash was marked by widespread panic among investors. As more and more people panicked, the crash deepened because people desperately tried to get out of unfavorable positions in the market. Numerous leading figures in the banking and stock trading community met to discuss ways in which the looming crisis could be averted, but the stock crash quickly grew too large for the banking and investment communities to counter with prudent market moves or policy recommendations.
It has been estimated that approximately $30 billion United States Dollars (USD) in 1929 dollars was lost during the events surrounding Black Tuesday. The stock market continued to decline in the wake of the Black Tuesday crash. Although some areas of the market experienced brief recoveries during the Depression, the overall trend was downwards, and the stock market hit bottom in 1932.
The reasons behind stock crashes are often very complex. Investor behavior plays a role, as do external factors such as political situations. When markets start to decline in value precipitously, it often sets off a snowball effect which becomes impossible to stop.