The Birth of Stock Markets
The earliest stock market has its roots in 12th century France, where men traded, managed, and regulated debts for banks. A century or so later, Italians and Belgians began to trade commodities, government securities, and stocks. By the 16th century, England had followed suit, and in 1602, The Dutch East India Company received a fixed capital stock, the first joint-stock company to do so. In 1792, what would later be known as the New York Stock Exchange was created by 24 major merchants who agreed to meet on the corner of Wall Street and Broad Street everyday in order to trade stocks and bonds. Alexander Hamilton, the first U.S. Secretary of the Treasury, was in favor of the creation of a stock market, and did everything in his power to ensure their success.
The Stock Market in the 19th Century
By 1817, the corner of Wall and Broad was getting too crowded to continue to hold the stock market there. Stock market traders decided to appoint a New York Stock & Exchange Board to oversee the stock market. This board, which would later become the New York Stock Exchange, decided to move the stock market into a building on 40 Wall Street, rather than continue to meet on the crowded corner outdoors.
In 1842, another stock market started doing business on the same corner of Wall and Broad, right under the current home of the now-named New York Stock & Securities Board. The aptly named New York Curb Exchange was a stock market that literally conducted its business on the curb outside of 40 Wall Street. This stock market would later be named the American Stock Exchange in 1953. The New York Curb Exchange differed in several ways from the New York Stock & Securities Board. The New York Curb Exchange was a stock market for smaller, newer companies, whereas the New York Stock & Securities Board was mostly a stock market for larger companies that had been around for awhile. For example, the New York Curb Exchange was the stock market that was more involved in the California Gold Rush.
By the middle of the century, the Industrial Revolution had helped to create wealth and increase the average person’s quality of life. People could travel more easily, had a little more leisure time, and had more money. This growth in personal wealth helped stock markets grow as well. Around this same time, people began to realize that they could make money in the stock market by re-selling stock. This was the start of the speculator market, which was much more volatile and unstable than a regular stock market.
Following the Civil War was a period of economic expansion in the United States, but the good times for the stock market soon came to an end. Several terrible things happened that affected the stock market adversely. The Black Friday Panic of 1869 caused stocks to plummet. In 1871, the Great Chicago Fire wreaked havoc with the stock market. The outbreak of equine influenza in 1872 affected the stock market, as transportation of people, goods, and services ground to a halt in light of the lack of healthy horses. These three events lead to the Panic of 1873, where a bank run lead to the New York Stock Exchange closing its doors for ten days beginning on September 20, 1873. This economic depression lasted until 1879, but by the end of the century, the stock market was experiencing record growth.
The Stock Market in the 20th Century
On April 22, 1903, the New York Stock Exchange moved to a new building on 18 Broad Street to accommodate their ever-expanding stock market. While the stock market continued to grow, events on the world stage caused the stock market to close. On July 31, 1914, the New York Stock Exchange closed due to the beginning of World War I, and didn’t completely reopen until mid-December of that year.
On October 24, 1929, on what is known as Black Thursday, the stock market crashed, causing a panic as investors tried to sell their stocks on Black Tuesday, October 29, 1929. This stock market crash would lead to the Great Depression. In 1934, Congress decided to regulate the stock market by passing the Securities and Exchange Act, out of which the Securities and Exchange Commission was formed. Despite this regulation, the stock market did not fully recover from the crash until 1954.
The stock market continued to see volatility throughout the rest of the century, though overall the stock market went up, not down. The twentieth century also saw the creation of NASDAQ in 1971, a virtual stock market where trades were done electronically. In 1999, the Dow Jones Industrial Average, which uses 30 different stocks from top companies to give investors insight into the health of the U.S. stock markets, topped 10,000, a record at the time.
The Stock Market Today
Today, the stock market trades an average of 1.46 billion shares, valued at over $46.1 billion, on a daily basis. When people refer to the stock market, they could be referring to the New York Stock Exchange, the American Stock Exchange, which is now a part of the New York Stock Exchange, or NASDAQ. The U.S. also has a variety of smaller, more local stock markets, such as the Arizona Stock Exchange and the Chicago Stock Exchange. As the economy becomes increasingly global, stock markets around the world are intertwined as they trade daily in hundreds of currencies from hundreds of different countries. Over the years, the stock market has become a place for everyone to invest. No longer is it a place solely for the rich or those with political power. Today, millions of people invest their money in the stock market for retirement, for fun, to create wealth, to support a company they believe in, and for myriad other reasons.