1973-1974 | Stock Market Crash

The stock market crash of 1973 to 1974 caused a so-called bear market between January 1973 and December 1974. All the world’s major stock markets were affected, especially the United Kingdom. It was one of the worst stock market declines since the Great Depression. The other is the financial crisis of 2007-2008.

The crash came after the collapse of the Bretton Woods system over the last two years, with the associated “Nixon shock” and the devaluation of the US dollar under the Smithsonian agreement. Added to this was the outbreak of the 1973 oil crisis in October of that year.

Development of the S&P 500 from January 1972 to December 1974

Progression of the crisis

Januar 1973

Beginn der Baisse.

September-Dezember 1974

Alle wichtigen Aktienindizes der zukünftigen G7-Staaten erreichen ihren Tiefpunkt.

Juni 1985

Der westdeutsche Markt kehrte innerhalb von 18 Monaten wieder auf das ursprüngliche Nominalniveau zurück.

Mai 1987

Das Vereinigte Königreich kehrt wieder auf das ursprüngliche Niveau zurück.

Juni 1985

Der westdeutsche Markt kehrte innerhalb von 18 Monaten wieder auf das ursprüngliche Nominalniveau zurück.


A period of excessive euphoria, preceding most crashes and in this case spurred by the first moon flights of the Apollo missions, sent share prices soaring to extreme heights.

However, despite the boom in the technology and computer industries, there was an extreme crash in share prices. The main cause of the crash, just like the bursting of the dotcom bubble in 2000, was low or no corporate profits. The average price-earnings ratio of technology stocks in 1968 was 114. Computer manufacturers were trading at 103 times their earnings. By comparison, stocks in the Dow Jones Index had an average P/E ratio of 16 in the peak year of 1968.

IBM, for example, could not meet the growing demand for its new System 370. The distribution system of bundling hardware and software was questioned by the Department of Justice and resulted in a 13-year-old lawsuit, the substance of which was eventually overtaken by developments in the industry and eventually shelved.

Comparison previous year / crisis year

7 Medium-term fractal indicators - 1972

7 Medium-term fractal indicators - 1973

7 Medium-term fractal indicators - 1974

Chart legend for the seven medium-term fractal indicators

Devaluation is the reduction of the nominal exchange rate of one’s own currency against foreign currencies when quoted in quantity. The opposite is revaluation.

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The Dow Jones Industrial Average (DJIA) – also known as the Dow Jones Index in Europe – is one of several stock indices created by the founders of the Wall Street Journal and the Dow Jones company, Charles Dow (1851-1902) and Edward Jones (1856-1920), in 1884.

Charles Dow compiled the index to measure the performance of the US stock market. The Dow Jones Index on the New York Stock Exchange (NYSE) is the oldest stock index still in existence in the USA after the Dow Jones Transportation Average and today is made up of 30 of the largest US companies.

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The Federal Reserve System, often called the Federal Reserve or simply the Fed (as the US Federal Reserve), is the central banking system of the United States.

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In the stock market, the word bull market (or bull market [os]; French for rise, increase) stands for persistently rising stock market prices, whereas bear market (or bear market [bɛs]; French for decline, decrease) stands for persistently falling prices. A “stock market cycle” comprises a bull market and a bear market.

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Hedge funds are actively managed investment funds in the financial sector whose business purpose is to make alternative investments and which therefore take on higher financial risks than classic investment funds.

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The S&P 500 (Standard & Poor’s 500) is a stock index comprising the shares of 500 of the largest listed US companies. The S&P 500 is weighted by market capitalisation and is one of the most widely followed stock indices in the world.

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The New Deal was a series of programs, pubIic work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939.

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