The 1929 Market and the 1990s
In 1929 the majority of the press and the federal government agreed that the stocks listed on the New York Stock Exchange (actually, some were on the Curb Exchange and some were unlisted) were too high. During 1929 the stocks increased in value by 35 percent from January 1 to September 19 (in 1929 dividends on common stock increased in total amount by 30 percent). In October 1929 the investors acted on the belief that stocks were too high, and the market crashed.
But compare the 1929 financial information with that of the mid 1990s. The dividend yield of stock listed on the New York stock exchange in the 1990s was consistently well below 3 percent. In 1929 it exceeded 3 percent. In November of 1996 the dividend yield of the Standard & Poor's 500 stock index fell below 2 percent.
The price-earnings ratios for the Standard & Poor's 500 stocks ranged from 16 to 25 in the 1990's. The P/E's during 1929 were well within that range, with the one exception being the high prices of September 1929. But by October, stock prices had fallen sufficiently so that the 1929 P/E's were well within the range of the P/E's of the 1990s.
The market to book value ratio of the Standard & Poor's industrial stocks trended upward in the 1990s from over three to over four. In 1929 the average ratio was well below four.