Booms & Bursts: A Tale of Stock Market Cycles

The chronicles of global markets are a testament to our constant quest for progress, innovation, and wealth. Over the years, we’ve seen graphs, with highs that spark confidence and lows that are inevitable. If we pay attention to the trends that shaped industries over centuries, one thing is clear, every rise has a fall.

Revolution & Renaissance: rewriting economies

Four centuries suffice to show economic history and development. In the early days of 1600, mercantilism’s rise started global trade networks, expanding through colonialism, and nations competed fiercely to hoard gold and silver thereby accumulated a humongous wealth. Colonial exploitation under a forced labour system resulted in stark wealth inequality. Much of Europe’s population lived in peasant poverty, while companies like the Dutch East India Company pioneered shareholding and joint ventures. Financial markets developed from these actions, yet this progress came at a price—most missed out because of wealth inequality and monopolies.

Fast forward to 1760, the first industrial revolution defined mechanisation in agriculture, textiles, and transportation; steam engines revolutionised production, and iron production met advancements. People moved to cities for factory jobs, creating a new economic dynamic centred around industrial capital. While this had opportunities for upward mobility and surging capital markets, the factories endured harsh conditions. Societies began grappling with worker rights, prompting early labour movements. Fuelled by the demand for infrastructure funding, markets overgrew, causing localised financial meltdowns from time to time.

1850 set sail with the Second Industrial Revolution, which brought steel, oil, and railroads as heavy industries. Massive monopolies like Standard Oil redefined industries, while telegraphs and railways connected markets like never before. As industries expanded, women began entering the workforce. Yet, the working class, while growing, underwent stagnating wages relative to the enrichment. The uneven work culture created labour unions, advocating for better conditions and wages.

As the 20th century dawned, globalisation took shape. The gold standard brought stability, and Britain became the world’s financial hub. With the increase in migration, global trade flourished, and markets became more interconnected. But with connectivity came vulnerability—economic shocks, like the Panic of 1907, reminded everyone of the risks. Distributing wealth remained unbalanced, alike previous economic shifts.

The interwar years, from 1918 to 1945, brought nothing special other than crippled economies. World War I left economies shattered, and the Great Depression exposed the cracks in financial systems. Governments scrambled to introduce regulatory reforms, but poverty and unemployment rode to political upheaval in many nations. Only Roosevelt had believed in addressing the economic instability.

Post World War II, the world leaders were in reconstruction mode. Europe rebuilt with the Marshall Plan, while the Bretton Woods Agreement stabilised global currencies pegging to the Dollar. Consumerism thrived, and middle-class prosperity surged in industrialised nations. Despite the economy finding its balance, developing countries struggled with the remnants of colonialism, and an over-reliance on oil paved to crises like the 1973 oil shock.

By the late 20th century, technology and globalisation reshaped the landscape. The internet revolutionised communication, and trade liberalisation brought opportunities—and challenges. Wealth skyrocketed for a few, but income disparity widened, as manufacturing jobs moved overseas, leaving certain worker classes in economic limbo. Bubbles, like the dot-com crash, were sobering reminders of risk in rapid technology adoption.

The 21st century witnessed the 2008 financial crisis and underscored how fragile interconnected markets could be. Now, as we are progressing with the 21st century, digital technology transformed everything. E-commerce, FinTech, Blockchain, AI, and the Metaverse have opened up phenomenal changes — but let’s be real, they’ve also widened the gaps along the way. The gig economy and automation reshaped the labour market, reducing job security for many workers. Remote work’s post-COVID rise highlighted a strong divide: tech’s winners versus its losers. Regardless of the quick market rebound, the recovery after COVID-19 is far from steady, with inflation and supply chain challenges.

From colonial trading routes to today, the journey of global markets is one of constant evolution, with each chapter offering lessons for the next. For every rise, there’s a fall—it’s just the way things move.

Rise & Fall: markets in flux

What’s fascinating is that the market never follows a straight path. One moment, it’s soaring to new heights, and the next, it’s tumbling into uncertainty. This uneven nature defines it—cycles of boom and burst, driven by human behaviour, economic forces, and global events. The rise and fall of the market aren’t just fluctuations; they’re the pulse of progress and the lessons of resilience.

No century has survived without an outburst. In the Tulip Mania of 1637, societal fascination with rare tulip bulbs turned into a frenzy, with prices escalating far beyond their intrinsic value. The bubble followed by the crash, financially ruined many, leading to widespread distrust in speculative markets.

Coming to the 18th century, The South Sea Bubble of 1720 was born from over promised returns by the South Sea Company, which capitalised on Britain’s desire for economic expansion through trade monopolies. Over-leverage and market manipulation inflated stock prices until the illusion collapsed, decimating fortunes.

By 1837, investment in land and commodities, along with unregulated banking, created an economic boom in the United States. However, tightening credit policies led to a banking decline, triggering a prolonged depression and reshaping land ownership.

The 1929 Great Depression, driven by excessive stock valuation during the roaring 1920s, devastated global economies. Wealth evaporated overnight, unemployment soared, and the social fabric frayed as breadlines and homelessness became common sights.

In 2008, the housing market bubble popped, fuelled by subprime lending and financial engineering. Millions lost their homes and jobs, setting off a global recession that took years to recover.

When financial crashes hit, they leave a trail of devastation, jobs vanish overnight, industries crumble, and families face foreclosures and bankruptcies. For middle and lower-income groups, the losses are brutal, widening the gap between the haves and the have-nots. The ripple effects go beyond numbers on a balance sheet—trust in institutions falters, social unrest brews, and people rethink their lives. It’s a harsh reminder of the cyclical nature of markets and the price we pay when things go wrong.

Recurrence & Resilience: cycles unfolding

Is a financial crisis an isolated event or a cyclical one? That’s the question with an indefinite answer. Financial crises aren’t random, one-off disasters. They’re deeply tied to the economy, the ebb and flow of market optimism and fear.

1637 - Tulip Mania

1720 - South Sea Bubble

1837 - Panic of 1837

1929 - Great Depression

2008 - Global Financial Crisis

Think about it: from the Tulip Mania of 1637 to the Global Financial Crisis of 2008, the story repeats itself. Markets grow as confidence piles, and then, because of unchecked greed, they crash. It’s a cycle as old as commerce itself. Yet, each crisis is unique in its triggers—some sparked by bubbles in assets, others by systemic weaknesses.

The timeline reveals a pattern of decreasing gaps, as the pace of technological, financial, and geopolitical changes accelerates. We have interconnected markets, cross-border trades and regional issues, making international political disorders. Whether it’s the products we buy, the trends we follow, or the way economies shape our choices, the world feels smaller and more connected than ever. Over the past five years, the world has faced COVID-19, wars, and trade tensions, unsettling everyone.

Predicting and timing the markets is undoable, another crash remains around the corner. History has shown us time and again—markets rise, markets fall. The only question is, how ready are we for the next chapter? Buckle up, it’s going to shake a bit !!

History repeats itself, first as a tragedy, second as a farce

~ Karl Marx