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People gather on the sub-treasury building steps across from the New York Stock Exchange in New York on "Black Thursday," Oct. 24, 1929. Thousands of investors lost their savings in the worst stock market crash in Wall Street history on Oct. 29, 1929, after a five-day frenzy of heavy trading. Too much speculation with borrowed money had inflated market values unrealistically. Huge buying orders, hastily erected by powerful financial interest, finally checked the most frantic sell-off experienced by the securities markets. The Great Depression followed thereafter. (AP Photo)

Markets always look forward, not back, but we investors can try to learn a few things from the past.

In one of history’s interesting coincidences, U.S. stock indexes jumped to new records Monday on the 90th anniversary of one of the darkest times in market history.

On Oct. 28 and 29, 1929, the Dow Jones industrial average lost 23% of its value, which remains the worst two-day loss in history. The speculative optimism of the Roaring Twenties had peaked in early September, and the market began to crater the preceding week, but it was the panic of that Black Monday and Black Tuesday that would scar investors for decades.

Later generations would receive similar scars from another Black Monday in 1987, the largest one-day selloff ever, and from severe bear markets that began in 2000 and 2008.

Each time, we learned that trees don’t grow to the sky and that a cataclysm can come without warning.

No one should try to time the market — even someone as smart as Irving Fisher, a leading economist in the 1920s, said just before the crash that the market had reached “a permanently high plateau.” After Black Tuesday, he confidently predicted a recovery that never came; the Dow wouldn’t pass its September 1929 high until 1954.

What investors should do is factor the possibility of a crash into their plans. That means staying diversified and, for most people, owning some bonds as a portfolio shock absorber. It also means suppressing FOMO, the fear of missing out, when everybody is investing in a risky fad like the dot-com stocks of 1999.

That doesn’t mean looking for a bear around every corner. Lately, with a trade war raging and the economy slowing, plenty of prognosticators have been predicting a stock market selloff. Instead, we’re at a new high with the market up 21% for the year.

The lofty heights might scare some people, but Joe Williams, chief investment strategist at Commerce Trust Co., says stock prices, in relation to corporate earnings, are just slightly above their long-term averages. With interest rates low, he finds the valuation reasonable.

“When you look at other options for where you are going to put your money, this is a very good environment for stocks,” Williams says.

He’s also encouraged by the market’s frosty greeting to money-losing newcomers. Uber and Lyft shares have fallen since they made their market debuts, and WeWork had to cancel its initial public offering. Skepticism is much healthier than speculative excess.

Mark Keller, chief investment officer at Confluence Investment Management, says investors have to realize that a sharp downturn will happen eventually. He thinks a “garden variety” bear market, with losses of 20% to 30%, is far more likely than a 1929- or 2008-style calamity.

“Those are survivable events, and anybody who invests in equities needs to have that type of scenario in their plans,” Keller says.

It’s a mistake, though, to let oneself be paralyzed by fear. Since last December, when stocks had fallen nearly 20% from their highs, individuals have been keeping more cash in money-market funds.

“That tells me a lot of households took money out of equities, and they haven’t plunged back in,” Keller says. “A lot of folks have missed out on this rebound.”

If the 1929 crash happened with little warning, the strong gains of 2019 also came when most people didn’t expect them. The market’s ability to surprise seems to be its one constant.

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