The Stock Market Crash of 1929. What happened in the election of 1928? When Americans elected Herbert Hoover President in 1928, the mood of the general.

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Presentation transcript:

The Stock Market Crash of 1929

What happened in the election of 1928? When Americans elected Herbert Hoover President in 1928, the mood of the general public was one of optimism and confidence in the United States economy. Most people believed that national prosperity would continue indefinitely.

What is a “Bull Market?” A "Bull Market" During the 1920s, there were rising prices in the stock market. During this period, American investors enjoyed an enormous "bull market." The opposite, a market characterized by falling prices, is called a "bear market."

Why did people invest in the stock market during the 1920s? 1. Rising stock dividends 2. Increase in personal spending 3. Relatively easy money policy 4. Companies invested their overproduction profits in new production. 5. Lack of stock market regulation.

What caused the stock market crash to occur? 1. An uneven distribution of money 2. Speculation and margin buying in the stock market 3. Excessive use of credit 4. Overproduction of consumer goods 5. A weak farm economy 6. Restrictive government policies, such as high tariffs

Margin Buying Borrowing money to buy stocks Example 100 shares at $10 a share = $1000 Margin buying required 10% down & then you borrowed the interest. MB: put down $100 and borrow $900

Good & bad of buying on margin Good: Buy more stocks with little $$ down Bigger profits More diversified (buy in different companies) Buy now pay later Bad: More risk Bigger losses Had to pay back all borrowed money

In your notebook Why did so many people invest their money in the stock market? Cite text evidence What is margin buying, and how did it help bring about the crash of the stock market in October of 1929.