I’m going to need you to buckle your seatbelts and get
ready…this is going to be an extremely bumpy ride as I take you through the
history of the major periods of stock market volatility that we have
experienced in the last 100 years! So,
with that being said, ladies and gentlemen, start your engines!
Man, that was lame. Lol.
But for real, get ready – this is going to be a heavy data blogpost
about some extremely serious periods of stock market volatility that have
occurred since 1928.
First off, why is the stock market so volatile in the first
place? Well, it’s simple really. The stock market is nothing more than a bunch
of shares of companies that the public owns, where the public dictates the
price each day, simply based off what they’re willing to pay for those
The thing is, people are absolutely insane. People don’t buy and sell stocks based off fundamentals, or at least not the majority of people. People buy and sell stocks based off what they hear from coworkers at the water cooler, or what they see on CNBC, or maybe even a shiny new company that just came off an IPO.
They sell their shares because a company has bad earnings call just to buy that stock back when it’s 10% higher because they don’t want to miss out on it.
People are the most unpredictable thing in the world, and
it’s not only with investing, but with any facet of life. I once had an internship with a 3rd
Party Logistics company and I called a truck driver to ask him if he was going
to make the delivery on time. He said
no. When I asked what the reasoning was,
he responded with “I wanted to go to the casino.”
One of my favorite quotes about the stock market, in
general, is from William Feather:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”
How true is that.
You’re selling or buying to someone else that is buying or selling those
same shares and you both think you’re right, but you’re not. It just doesn’t work that way. But that is one of the many things, and in my
opinion the biggest thing, that causes the stock market to be so volatile.
So, just how volatile is the stock market, actually?