Stock market crash of 1973–4

The stock market crash of 1973–4 was a stock market crash that lasted between January 1973 and December 1974. Affecting all the major stock markets in the world, particularly the United Kingdom,cite journal |last=Davis |first=E. Philip |year=2003 |month=January |title=Comparing bear markets - 1973 and 2000 |journal=National Institute Economic Review |volume=183 |issue=1 |pages=pp. 78–89 |url=http://ner.sagepub.com/cgi/content/abstract/183/1/78 |accessdate=2007-09-11 |doi=10.1177/0027950103183001464 ] it was one of the worst stock market downturns in modern history.cite web |url=http://mutualfunds.about.com/cs/history/p/crash7.htm |title=1973 - 1974 Stock Market Crash |accessdate=2007-09-11 |last=Woodard |first=Dustin |date= |work= |publisher=About.com ] The crash came after the collapse of the Bretton Woods system over the previous two years, with the associated 'Nixon Shock' and United States dollar devaluation under the Smithsonian Agreement. It was compounded by the outbreak of the 1973 oil crisis in October of that year.

In the 694 days between 11 January 1973 and 6 December 1974, the New York Stock Exchange's Dow Jones Industrial Average benchmark lost over 45% of its value, making it the seventh-worst bear market in the history of the index. 1972 had been a good year for the DJIA, with gains of 15% in the twelve months. 1973 had been expected to be even better, with Time magazine reporting, just 3 days before the crash began, that it was 'shaping up as a gilt-edged year'. [cite news |first= |last= |title=A Gilt-Edged Year for the Stock Market |url=http://www.time.com/time/magazine/article/0,9171,910532,00.html |publisher=Time |date=8 January 1973 |accessdate=2007-09-11 ] In the two years from 1972 to 1974, the American economy slowed from 7.2% real GDP growth to -2.1% contraction, while inflation (by CPI) jumped from 3.4% in 1972 to 12.3% in 1974.

Worse was the effect in the United Kingdom, and particularly on the London Stock Exchange's FT 30, which lost 73% of its value during the crash. [cite web |url=http://news.bbc.co.uk/1/hi/business/2860261.stm |title=Reading the stock market |accessdate=2007-09-11 |last=Dampier |first=Mark |date=6 May 2003 |publisher=BBC News ] From a position of 5.1% real GDP growth in 1972, the UK went into recession in 1974, with GDP falling by 1.1%. At the time, the UK's property market was going through a major crisis, and a secondary banking crisis forced the Bank of England to bail out a number of lenders.cite news |first=Grant |last=Ringshaw |title=Why we should fear a nasty 70s revival |url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2003/02/02/ccstox02.xml |publisher=Daily Telegraph |date=1 February 2003 |accessdate=2007-09-11 ] 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%. However, unlike in the United States, inflation continued to rise, to 25% in 1975, giving way to the era of stagflation.

All the main stock indexes of the future G7 bottomed out between September and December 1974, having lost at least 34% of their value in nominal terms, and 43% in real terms. In all cases, the recovery was a slow process. Although West Germany's market was fastest to recover, returning to the original nominal level within eighteen months, even it did not return to the same real level until June 1985. The United Kingdom didn't return to the same market level until May 1987 (only a few months before the Black Monday crash), whilst the United States didn't see the same level in real terms until August 1993: over twenty years after the 1973–4 crash began.

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