OK, maybe it is not fair to call years ending in seven a curse. But years ending in seven have had a checkered record. Since 1830, the Dow Jones Industrials (DJI) has recorded nine up years and nine down years ending in seven. Years ending in seven have the second worst year record for the DJI. The leader or, in this case, the biggest loser is years ending in three. Its record is nine up years and ten down years. As to the biggest winner, well, that honor goes to years ending in five with a record of sixteen up years vs. three down years.
Years ending in seven are the leader in one category. They have the most losses totaling 20% or more. The total is four. 1857 saw the DJI lose 31%, in 1907 the DJI was down 37.7%, in 1917 the DJI dropped 21.7%, and finally in 1937 the DJI fell 32.8%. Years ending in seven have also been, overwhelmingly, associated with stock market panics and crashes. Note the following:
Year
Panic Or Crash
What Happened
1837
Panic of 1837
A financial crisis, major recession/depression deflation, bank collapses, high unemployment. The panic was triggered by a collapse of speculative lending, the bursting of a land bubble, and a collapse in cotton prices. Lasted from about 1837 to 1844. The Mexican-American war followed from 1846–1848.
1847
Panic of 1847
This panic was short-lived. It centered mainly in Great Britain and was associated with the end of the 1840’s railway boom. It was also triggered by a change in banking that required banks to shore up their reserves with gold and silver. The panic shattered a vast number of businesses.
1857
Panic of 1857
The first worldwide financial crisis. Businesses failed, banks collapsed, railways declined, thousands lost their jobs. The collapse was triggered after the sinking of the SS Central America that was carrying an important shipment of gold needed to shore up currencies. A major trust company collapsed which triggered a series of bankruptcies. The American Civil War followed from 1861–1865.
1907
Panic of 1907
The Panic of 1907 was also known as the Banker’s Panic or the Knickerbocker Crisis. Stock markets fell almost 50%. There were runs on banks and trust companies. Many state and local banks and businesses went bust. It was started by a failed attempt to corner the market by the United Copper Company. NYC’s third largest trust, the Knickerbocker Trust Co., was at the heart of the panic. The panic was saved by J.P. Morgan who led bankers to shore up the financial system. The panic led to the formation of the Federal Reserve in 1913. WW1 followed from 1914–1918.
1937
Crash of 1937
The stock market crash of 1937 was a secondary collapse within the context of the Great Depression. The DJI fell about 40% in 1937/1938. It was triggered by a negative reaction to Roosevelt’s New Deal. A weak stock market persisted until 1942 when the final bottom was seen. WW2 followed from 1939–1945.
1987
Crash of 1987
October 19, 1987 was known as “Black Monday.” The stock market peaked in August 1987, up some 44% from the previous year’s close. Rising interest rates and a growing US trade deficit helped trigger the crash, but program trading exacerbated it. The expectation was it was going to result in another Great Depression. It didn’t, and by 1989 the DJI had recovered its 1987 high. The Gulf War followed in 1990. The DJI lost upwards of 40% in the crash, but 1987 ended the year with a small gain.
1997
Asian financial crisis, October 1997 mini-crash
Overheated stock markets and the busting of currency pegs in Asia triggered an Asian financial crisis, starting with the collapse of the Thailand Bhat and subsequent stock market crashes in Thailand, Indonesia, South Korea, and Philippines as well as Hong Kong. The DJI followed with a mini-crash in October 1997, but the year 1997 ended in the black for the DJI. A bigger mini-panic was sparked in 1998 with the Russian financial crisis. This resulted in huge liquidity injections into the financial system to prevent a collapse, leading directly to the dot.com bubble that culminated in 2000 leading to the High-Tech/Internet collapse of 2000–2002.
2007
Financial crisis of 2007–2009
No, there was not a financial panic in 2007, but the genesis of the financial panic of 2008 was sown in 2007 in July with the collapse of some hedge funds managed by Bear Stearns because of collateralized sub-prime mortgage loans. The market peaked in October 2007. In 2008, the financial panic saw markets fall over 50%.
Source: David Chapman
