The stock market: a story of ups and downs
The stock market has a long history dating back to the 13th and 14th centuries, when the first organized markets emerged in Europe. These markets were based on the exchange of documents that proved the possession of goods, such as grains, metals or fabrics. These documents were called "exchange slips" and were negotiated between merchants and bankers.
Over time, these markets evolved and specialized in different types of assets. One of them was the stock market, which originated in the 17th century, when maritime trading companies began to issue shares to finance their expeditions. These shares were sold on stock exchanges, which were places where buyers and sellers of shares met. The first recognized stock exchange was that of Amsterdam, founded in 1602.
The stock market has since experienced numerous changes and crises, which have reflected the historical, political and social events of each era. Some of the most important milestones of the stock market are the following:
- The tulip bubble (1634-1637): it was the first mass speculation in history, which occurred in Holland due to the trade in tulip bulbs. The prices of these bulbs skyrocketed to astronomical figures, but then collapsed, causing the ruin of many investors.
- The bubble of the South Sea Company (1719-1720): it was a financial scam that was concocted in England by the South Sea Company, which promised great benefits from trade with the Spanish colonies in America. The company issued shares that were traded at exorbitant prices, but it was later revealed that the company did not have the permits or resources to conduct such trading. The result was a sharp drop in stocks and an economic crisis.
- The crash of '29 (1929): it was the largest stock market crisis in history, which originated in the United States due to the collapse of the New York Stock Exchange. This collapse was the result of an overvaluation of stocks, which had been inflated by easy credit and speculation. The stock crash plunged the global economy into a deep depression, which lasted more than a decade.
- Black Monday (1987): it was a day of panic in the financial markets, which began in Hong Kong and spread throughout the world. Stock markets suffered historic falls, exceeding 20% in some cases. The causes of this collapse were diverse, such as trade imbalance, rising interest rates, overvaluation of stocks and the use of automatic trading software.
- The dotcom bubble (1995-2000): it was a period of euphoria due to the development of the Internet and companies related to technology. The shares of these companies were traded at very high prices, which did not correspond to their actual profits. The bubble burst when a market correction occurred, causing many companies to go bankrupt and billions of dollars to be lost.
- The global financial crisis (2007-2008): it was a crisis that originated in the United States due to the collapse of the high-risk mortgage market, known as subprime. This collapse generated a chain of defaults and bankruptcies in the financial sector, which spread to the rest of the economy. Stock markets plummeted and governments had to intervene to rescue banks and stimulate economic activity.
- The COVID-19 pandemic (2020-2021): was a global health crisis caused by a new coronavirus, which caused millions of deaths and infections. The pandemic forced confinement and mobility restriction measures to be imposed, which seriously affected economic and social activity. Stock markets suffered sharp declines, but later recovered thanks to expansive monetary and fiscal policies and the development of vaccines.
These are just some examples from the history of the stock market, which shows how this market is a reflection of the economic, political and social reality of each moment. The stock market is an arena where battles are fought between greed and fear, between reason and emotion, between supply and demand. The stock market is a place where you can make or lose a lot of money, but also where you can learn a lot about human nature and the way the world works.
