S&P 500 Index

V-Shaped.. The S&P 500 printed an all-time high above 7,000 in late January on the back of consensus earnings growth forecasts of 14 to 15% and a tech sector guided to more than 30% profit expansion. The Iran war and the Hormuz supply shock then drove Brent above $110, pushed the OECD to lift US inflation to 4.2%, forced the Fed to reprice 2026 to a single cut, and sent the index to a March 25 low of 6,477, a drawdown of roughly 7%. AAII bearish sentiment hit 51.4%, a reading touched only 5% of the time since 1987 and historically followed by a 16% twelve-month gain. The April 7 US-Iran ceasefire and the April 17 reopening of the Strait of Hormuz collapsed the risk premium almost as fast as it built, with Brent retreating toward $82. The S&P reclaimed 7,000 on April 15 and closed at a fresh all-time high of 7,126 on April 17, up 3.9% year to date, with Q1 earnings tracking double-digit growth for the sixth consecutive quarter. The story of 2026 so far is not the war. It is how fast equities priced in the peace.

Tariff Shock Triggers Sharp Correction Before Historic Recovery Rally. The S&P 500 hit a new all-time high of 6,144 in mid-February before the Trump administration’s sweeping reciprocal tariffs in early April triggered the worst single-week selloff since 2020, with the index bottoming on April 8. Markets reversed sharply after tariff rates were lowered through trade deals and a temporary truce with China. The S&P 500 surged nearly 39% from the April low through year-end as AI stocks continued to lead, with Nvidia, Alphabet, Microsoft, Broadcom, and Meta accounting for the bulk of gains. The Fed held rates steady for most of the year as inflation remained sticky above target.

Nvidia Triples as AI Mania Powers S&P 500 Past 6,000. Nvidia’s stock tripled on the back of insatiable data center demand for its AI chips, becoming the world’s most valuable company by market cap at various points during the year. The Fed began cutting rates in September, delivering 75 basis points of easing by year-end. Trump won the presidential election in November, sparking a postelection rally on expectations of deregulation and tax cuts. The S&P 500 closed above 6,000 for the first time in history.

AI Boom Ignites Magnificent Seven Rally While Regional Banks Collapse. ChatGPT’s viral success in late 2022 ignited an AI investment frenzy that powered the Magnificent Seven stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) to massive gains, accounting for the bulk of the S&P 500’s 24.2% return. Silicon Valley Bank collapsed in March after a classic bank run driven by unrealized losses on long-duration bonds, briefly triggering fears of a systemic banking crisis. The Fed hiked rates to 5.5% but soft landing optimism grew as inflation cooled.

Fed’s Fastest Rate Hike Cycle Since 1980 Triggers Bear Market. Russia invaded Ukraine in February, sending oil above $130 and wheat to record highs. The Fed responded to 9.1% CPI inflation with seven consecutive rate hikes, raising from 0% to 4.5% in ten months. The S&P 500 entered a bear market, falling 25.4% peak-to-trough while the NASDAQ dropped 33%. Bitcoin collapsed from $47K to $16K after FTX’s November implosion triggered a crypto winter erasing $1.4 trillion in market value.

Meme Stock Mania and Stimulus Flood Drive Record Retail Trading. GameStop surged over 1,500% in January as retail traders on Reddit’s WallStreetBets squeezed institutional short sellers, creating a cultural phenomenon. The federal government distributed over $1.9 trillion in stimulus through the American Rescue Plan. SPACs raised a record $162 billion. Inflation began accelerating past 5% by mid-year but the Fed maintained its "transitory" stance. Bitcoin hit $69,000 in November before beginning its decline. The S&P 500 hit 70 all-time highs during the year.

COVID-19 Triggers Fastest Market Crash in History Followed by V-Shaped Recovery. The S&P 500 plunged 34% in just 22 trading days as COVID-19 lockdowns shut down the global economy. Circuit breakers triggered four times in March. The Fed slashed rates to zero and launched unlimited quantitative easing. Congress passed $2.2 trillion in CARES Act stimulus including $1,200 direct payments. Markets staged a complete V-shaped recovery by August, driven by tech stocks benefiting from the stay-at-home economy. Pfizer announced vaccine efficacy data in November, igniting a rotation into value stocks.

Fed Reverses Course With Three Rate Cuts After Near-Recession Scare. After the December 2018 selloff brought the S&P 500 within 0.2% of bear market territory, the Fed executed a dramatic pivot from rate hikes to three consecutive rate cuts. A brief yield curve inversion in August raised recession alarms but the economy held steady. The U.S. and China reached a Phase 1 trade deal in December. A September repo market crisis forced the Fed to inject $75 billion in overnight liquidity. The S&P 500 surged 28.9%, its best year since 2013.

Trade War Escalation and Fed Tightening Push Market to the Brink. The U.S.-China trade war escalated through rounds of tariffs on $250 billion worth of goods, rattling supply chains and corporate confidence. The Fed hiked rates four times, bringing the federal funds rate to 2.5%. Apple issued a rare revenue warning in January 2019 citing weak China demand. The S&P 500 plunged 19.8% from its September peak to its Christmas Eve low, coming within a whisker of an official bear market. Volatility spiked as the VIX jumped from 12 to 36 in a single week.

Tax Cuts and Low Volatility Fuel a Steady, Historic Rally. The S&P 500 gained in every single month of the year for the first time since 1958, reflecting extraordinary calm in markets. The VIX averaged just 11.1, its lowest annual reading ever. Congress passed the Tax Cuts and Jobs Act in December, slashing the corporate tax rate from 35% to 21%. Bitcoin surged from $1,000 to nearly $20,000, creating mainstream crypto awareness. Amazon acquired Whole Foods for $13.7 billion, reshaping the retail sector.

Brexit Shock and Trump Election Surprise Whipsaw Global Markets. Britain’s June referendum vote to leave the European Union stunned global markets, briefly erasing $2 trillion in equity value in two days before a sharp recovery. Donald Trump’s unexpected November election win initially caused futures to crash, then reversed into a powerful postelection rally on expectations of tax cuts and infrastructure spending. Oil bottomed at $26 per barrel in February, its lowest since 2003, before doubling by year-end after OPEC agreed to production cuts.

China Devaluation Panic and First Fed Rate Hike in Nearly a Decade. China’s surprise devaluation of the yuan in August triggered a global selloff that erased 11% from the S&P 500 in just six trading sessions, briefly pushing the index into correction territory. The Flash Crash of August 24 saw the Dow open down 1,000 points. Despite the turbulence, the Fed raised rates for the first time since June 2006, lifting from near zero to 0.25% in December. It was the flattest year for the S&P 500 since 2011.

Oil Prices Crash 50% as Fed Ends Quantitative Easing Program. The Fed officially ended its QE3 bond-buying program in October after purchasing over $1.6 trillion in assets since 2012. Oil prices collapsed from $107 to $53 per barrel as Saudi Arabia refused to cut production, crushing energy stocks while acting as a tax cut for consumers. Russia’s annexation of Crimea triggered the first major European geopolitical crisis since the Cold War. The S&P 500 gained 11.4% as the economic expansion strengthened, with unemployment falling below 6% for the first time since 2008.

Taper Tantrum Rocks Bond Markets but Stocks Deliver Best Year Since 1997. Fed Chair Ben Bernanke’s May suggestion that the Fed might begin tapering its bond purchases triggered a violent selloff in Treasury markets, with the 10-year yield spiking from 1.6% to 3.0% over four months. Despite the bond market turmoil, the S&P 500 surged 29.6% for its best annual performance since 1997. Corporate earnings hit record highs. Twitter went public at a $14 billion valuation. Detroit filed for the largest municipal bankruptcy in U.S. history.

Fed Launches QE3 Unlimited Bond Buying Amid Fiscal Cliff Fears. The Fed launched QE3 in September with an open-ended commitment to buy $85 billion in bonds per month until the labor market improved substantially. President Obama won reelection in November. Markets spent Q4 anxious about the fiscal cliff, a combination of automatic tax hikes and spending cuts set for January 2013 that economists warned could trigger a recession. Facebook’s May IPO priced at $38 but fell 50% within three months before eventually recovering. The European debt crisis continued to simmer with Greek austerity protests.

U.S. Loses AAA Credit Rating for the First Time in History. Standard & Poor’s downgraded the United States’ credit rating from AAA to AA+ in August after a bitter debt ceiling standoff pushed the nation to the brink of default. The S&P 500 swung wildly, dropping 19.4% from April to October before recovering to finish the year flat. The European sovereign debt crisis intensified as Greek bond yields topped 30% and Italy’s borrowing costs surged. Occupy Wall Street protests spread across 600 communities, channeling public anger at income inequality and bank bailouts.

Flash Crash Erases $1 Trillion in Minutes as Dodd-Frank Becomes Law. On May 6, the Dow Jones plunged nearly 1,000 points in minutes before rebounding, erasing roughly $1 trillion in market value in what became known as the Flash Crash. Investigators later attributed it to a single large futures sell order interacting with high-frequency trading algorithms. Congress passed the Dodd-Frank Wall Street Reform Act in July, the most sweeping financial regulation since the 1930s. The European debt crisis erupted as Greece required a $146 billion bailout, with contagion fears spreading to Portugal, Ireland, and Spain.

S&P 500 Hits Generational Low of 666 Before Historic Recovery Begins. The S&P 500 bottomed at 666.79 on March 9, marking the end of a 57% decline from its 2007 peak and what many investors now call a generational buying opportunity. The Fed launched QE1, purchasing $1.75 trillion in mortgage-backed securities and Treasury bonds. Congress passed the $787 billion American Recovery and Reinvestment Act. From the March low, the index rallied 68% through year-end. Unemployment peaked at 10% in October. Bank stress tests in May restored some confidence in the financial system, though credit markets remained fragile.

Lehman Brothers Collapses Triggering the Worst Financial Crisis Since the Great Depression. Lehman Brothers filed for bankruptcy on September 15 with $639 billion in assets, making it the largest bankruptcy in American history. The credit markets froze almost immediately. AIG required a $182 billion government bailout to prevent a cascade of counterparty failures. Congress passed the $700 billion TARP bailout after an initial rejection that sent the Dow down 778 points in a single day. The S&P 500 lost 38.5% for the year, its worst performance since 1937. Global wealth declined by an estimated $17 trillion.

Subprime Mortgage Cracks Emerge as Two Bear Stearns Hedge Funds Collapse. The first visible cracks in the housing bubble appeared when two Bear Stearns hedge funds loaded with subprime mortgage securities collapsed in June, wiping out $1.6 billion in investor capital. The S&P 500 hit an all-time high of 1,565 in October, masking the growing crisis beneath the surface. The ABX index tracking subprime bonds plunged throughout the year. The Fed cut rates by 50 basis points in September, its first cut since 2003. Housing starts fell 25% from their 2006 peak while foreclosure filings surged 75%.

Housing Market Peaks as Subprime Lending Reaches Dangerous Levels. The U.S. housing market hit its peak in mid-2006, with the S&P/Case-Shiller national index reaching its all-time high before beginning a decline that would eventually erase $6 trillion in household wealth. Subprime mortgages accounted for 23.5% of all mortgage originations, up from 8% in 2003. The Fed raised rates to 5.25% after 17 consecutive hikes over two years. Despite gathering clouds in housing, the S&P 500 gained 13.6% as corporate profits hit record levels and buyback activity surged.

Housing Bubble Inflates as Hurricane Katrina Devastates Gulf Coast. Hurricane Katrina struck the Gulf Coast in August, causing $125 billion in damage and killing over 1,800 people, making it the costliest natural disaster in U.S. history at the time. Oil prices topped $70 per barrel for the first time. The housing market showed signs of overheating as median home prices rose 12.4% year-over-year and adjustable-rate mortgage applications surged. The Fed continued raising rates, moving from 2.25% to 4.25% across eight meetings. The S&P 500 delivered a modest 3.0% return amid tightening financial conditions.

Fed Begins Rate Hike Cycle as Facebook Launches From a Harvard Dorm. The Fed began its first tightening cycle since 1999, raising rates from 1.0% to 2.25% across five meetings. Mark Zuckerberg launched Facebook from his Harvard dorm room in February. Google went public in August at $85 per share, valuing the company at $23 billion. The Iraq War continued to weigh on public sentiment as the insurgency intensified. Oil prices rose above $55 per barrel. President Bush won reelection in November. The S&P 500 returned 9.0%, signaling growing confidence in the post-recession recovery.

Iraq Invasion Marks the Low Point Before a Powerful Market Recovery. The U.S. invaded Iraq on March 20, and the S&P 500 hit its bear market low of 800 just days before, marking the bottom of a brutal three-year decline. From that March low, the index rallied 32% through year-end. The Fed held rates at 1.0%, the lowest since 1958, to support the fragile recovery. The housing boom accelerated as mortgage rates fell below 6% and home sales hit records. Corporate scandals from the prior year led to the creation of the PCAOB under the Sarbanes-Oxley Act.

WorldCom Fraud and Iraq War Buildup Drive S&P 500 to Bear Market Low. WorldCom’s $11 billion accounting fraud was uncovered in June, the largest corporate scandal in history at the time, resulting in the company’s bankruptcy filing with $107 billion in assets. The SEC launched investigations into dozens of companies. The S&P 500 fell 23.4%, marking the third consecutive year of losses for the first time since 1939-1941. The index touched 776 in October, down 49% from its 2000 peak. Congress passed the Sarbanes-Oxley Act to restore investor confidence. The Bush administration made its case for invading Iraq.

September 11 Attacks Shut Down Markets and Deepen Recession. The September 11 terrorist attacks killed nearly 3,000 people and shut the New York Stock Exchange for four trading days, the longest closure since the Great Depression. When markets reopened on September 17, the S&P 500 fell 4.9% in a single session and lost 11.6% for the week. The NBER declared a recession had begun in March. Enron filed for bankruptcy in December with $63 billion in assets after its massive accounting fraud was exposed. The Fed cut rates 11 times during the year, from 6.5% to 1.75%.

Dot-Com Bubble Bursts as NASDAQ Begins Historic 78% Collapse. The NASDAQ peaked at 5,048 on March 10 before beginning a devastating decline that would ultimately erase 78% of its value over the next two years. Pets.com, which went public in February at $11 per share, was trading at $0.19 by November. The S&P 500 P/E ratio reached 44, more than double its long-term average of 16. The Fed raised rates to 6.5% in an attempt to cool speculation. The presidential election between Bush and Gore ended in the contested Florida recount, adding political uncertainty to an already nervous market.

Y2K Frenzy and Dot-Com IPO Mania Push Valuations to Historic Extremes. Dot-com IPOs reached peak absurdity as companies with no revenue doubled or tripled on their first day of trading. The average internet IPO gained 235% from its offer price. Panic over the Y2K millennium bug drove massive corporate IT spending and stockpiling. The Fed raised rates three times in the second half of the year to cool speculation. The S&P 500 P/E ratio climbed past 44, its highest level in recorded history. Day trading became a cultural phenomenon as online brokerage accounts surged past 10 million.

LTCM Collapse Nearly Triggers Systemic Meltdown Before Fed Rescue. Long-Term Capital Management, a hedge fund run by Nobel laureates and former Salomon Brothers traders, lost $4.6 billion in less than four months after Russia defaulted on its debt and devalued the ruble in August. The Fed organized a $3.6 billion private-sector bailout to prevent a systemic cascade across global markets. Despite the turmoil, the S&P 500 surged 26.7% as the Fed cut rates three times in the fall and the tech bubble continued inflating. The Asian financial crisis, which began in 1997, continued to depress emerging markets.

Asian Financial Crisis Erupts While Amazon IPO Signals Internet Future. The Thai baht’s collapse in July triggered a financial crisis that spread across East Asia, devastating the currencies and stock markets of Thailand, Indonesia, South Korea, and Malaysia. The IMF arranged $118 billion in bailout packages. Despite Asian contagion fears, the S&P 500 surged 31.0% as U.S. tech stocks attracted global capital flows fleeing emerging markets. Amazon went public in May at $18 per share, valuing the online bookseller at $438 million. The Dow crossed 8,000 for the first time.

Greenspan’s Irrational Exuberance Warning Fails to Slow the Bull Market. Fed Chair Alan Greenspan delivered his famous "irrational exuberance" speech in December, questioning whether asset values had become detached from fundamentals. The market briefly dipped but resumed its upward march within days. The Telecommunications Act of 1996 deregulated the industry and fueled a wave of mergers. Clinton won reelection in a landslide over Bob Dole. The S&P 500 gained 20.3%, the third consecutive year of 20%+ returns, something that had not happened since the 1950s.

Netscape IPO Launches the Internet Boom and a Five-Year Bull Run. Netscape went public on August 9 at $28 per share and closed at $58, doubling on its first day and igniting Wall Street’s fascination with the commercial internet. The S&P 500 surged 34.1%, its best year since 1958, as the Fed paused rate hikes and the economy achieved the rare combination of strong growth with low inflation. Microsoft launched Windows 95 to massive consumer fanfare. The Dow crossed 5,000 for the first time. Corporate earnings were strong across sectors as globalization accelerated.

Fed Surprises Markets With Six Rate Hikes Triggering a Bond Market Rout. The Fed raised rates six times over 12 months, doubling the federal funds rate from 3.0% to 6.0% in what became known as the Great Bond Massacre. The 30-year Treasury yield spiked from 6.2% to 8.0%, inflicting the worst losses on bond investors since the 1920s. Orange County, California declared bankruptcy after its treasurer lost $1.7 billion on leveraged interest rate bets. The Mexican peso crisis erupted in December. The S&P 500 managed to lose only 1.5% as strong corporate earnings partially offset the rate shock.

NAFTA Signed Into Law as World Trade Center Suffers First Bombing. President Clinton signed the North American Free Trade Agreement in December, creating the world’s largest free trade zone between the U.S., Canada, and Mexico. In February, a truck bomb detonated beneath the World Trade Center, killing six people in the first major terrorist attack on U.S. soil. The Fed held rates steady at 3.0% throughout the year. Long-term bond yields fell, fueling a refinancing boom. The S&P 500 returned 7.1% as the economic recovery from the 1990-91 recession gathered momentum.

Clinton Defeats Bush as Economy Struggles With Slow Recovery. Bill Clinton won the presidential election on the message "It’s the economy, stupid," defeating incumbent George H.W. Bush and independent candidate Ross Perot. The economy was technically growing but job creation remained weak, with unemployment hovering above 7% for most of the year. The Fed cut rates twice, bringing them to 3.0%. Hurricane Andrew caused $27 billion in damage in Florida. The European Exchange Rate Mechanism crisis forced Britain and Italy to exit, causing currency turmoil across Europe.

Gulf War Victory and Soviet Collapse Mark the Birth of the American Unipolar Moment. Operation Desert Storm liberated Kuwait in just 42 days, sending a wave of patriotic confidence through markets. The 1990-91 recession officially ended in March. The Soviet Union dissolved on December 26, ending the Cold War and opening vast new markets to Western capital. The Fed cut rates aggressively, moving from 6.75% to 4.0% over the year. The S&P 500 surged 26.3% as investors priced in peace dividends and a new era of American economic dominance. The Dow closed above 3,000 for the first time.

Iraq Invades Kuwait as the Savings and Loan Crisis Costs Taxpayers $160 Billion. Saddam Hussein’s August invasion of Kuwait sent oil prices from $17 to $41 per barrel in three months, triggering a global economic slowdown. The S&P 500 fell 19.9% from its July peak to its October low. The savings and loan crisis reached its climax, with the eventual taxpayer cost reaching $160 billion for the bailout of over 1,000 failed institutions. The NBER declared a recession had begun in July. Japan’s Nikkei index peaked at 38,957 on December 29, 1989, beginning a decline that would last decades.

Berlin Wall Falls and the Junk Bond Market Collapses. The Berlin Wall fell on November 9, signaling the end of communism in Eastern Europe and opening massive new markets for Western investment. The S&P 500 surged 27.3% despite a mini-crash on October 13 (a failed leveraged buyout of United Airlines caused a 7% intraday drop in the Dow). Drexel Burnham Lambert, the investment bank that pioneered the junk bond market, pleaded guilty to securities fraud. Michael Milken was indicted on 98 counts of racketeering. The Exxon Valdez oil spill in Alaska raised environmental awareness.

Market Recovers From Black Monday as Bush Wins the Presidency. The S&P 500 recovered from Black Monday’s devastation, gaining 12.4% as corporate earnings proved resilient and the economy avoided recession. George H.W. Bush won the presidential election over Michael Dukakis on a promise of "no new taxes." The savings and loan crisis accelerated, with over 200 thrifts failing during the year. The Fed raised rates four times as inflation began creeping higher. Pan Am Flight 103 was destroyed by a bomb over Lockerbie, Scotland, killing 270 people. The drought of 1988 devastated Midwest agriculture.

Black Monday Crash Erases 20% of S&P 500 Value in a Single Day. October 19, 1987, known as Black Monday, remains the largest single-day percentage decline in stock market history. The Dow fell 22.6% and the S&P 500 lost over 20% as computerized program trading and portfolio insurance strategies amplified selling into a cascading crash. The decline wiped out $500 billion in market value in hours. Fed Chair Alan Greenspan, in office less than two months, responded swiftly by flooding the financial system with liquidity. Remarkably, the S&P 500 still finished the year up 2.0%, having gained 44% before the crash.

Oil Prices Collapse 67% and Tax Reform Act Reshapes the Economy. Oil prices collapsed from $31 to $10 per barrel as Saudi Arabia abandoned production restraint to reclaim market share, devastating energy-dependent economies and U.S. oil patch states like Texas and Oklahoma. President Reagan signed the Tax Reform Act of 1986, the most comprehensive tax overhaul in decades, reducing the top individual rate from 50% to 28% while broadening the tax base. The Space Shuttle Challenger exploded 73 seconds after launch in January, killing all seven crew members. The S&P 500 gained 14.6% as lower oil prices boosted consumer spending.

Plaza Accord Weakens the Dollar as Corporate M&A Wave Begins. The finance ministers of the G5 nations signed the Plaza Accord in September, agreeing to intervene in currency markets to devalue the U.S. dollar, which had strengthened 50% over the previous four years. The weaker dollar boosted American exports and corporate earnings. A wave of hostile takeovers and leveraged buyouts swept corporate America, pioneered by firms like KKR and fueled by Drexel Burnham’s junk bond machine. The S&P 500 surged 26.3% as falling interest rates and improving corporate profits created broad market enthusiasm.

Economic Expansion Continues but Budget Deficit Concerns Mount. The economic recovery from the 1981-82 recession continued with GDP growing 7.2% in real terms, the strongest growth since 1951. However, the federal budget deficit ballooned to $185 billion (4.8% of GDP), raising concerns about long-term fiscal sustainability. The Fed kept rates elevated near 10% to prevent inflation from reigniting. AT&T was broken up into seven Regional Bell Operating Companies on January 1 in the largest corporate divestiture in history. Apple launched the Macintosh with its iconic "1984" Super Bowl ad.

Economy Roars Back With 4.6% GDP Growth as Bull Market Accelerates. The economy surged out of recession with 4.6% real GDP growth as Volcker’s inflation war paid dividends. Consumer spending rebounded sharply and unemployment began falling from its 10.8% peak. The S&P 500 gained 17.3% as investors gained confidence that the inflationary 1970s were truly over. The Dow crossed 1,200 for the first time. Pioneer Hi-Bred introduced the first genetically modified plant. The U.S. deployed Pershing II missiles in Europe, escalating Cold War tensions with the Soviet Union.

Market Bottoms on August 12 Launching the Greatest Bull Run in Modern History. The S&P 500 hit its cycle low on August 12 at 102, then exploded higher in one of the most powerful rallies in market history, gaining 42% from the August low through year-end. Volcker began easing monetary policy as inflation fell from 13.5% to 6.1%. Mexico defaulted on its sovereign debt in August, triggering the Latin American debt crisis. Unemployment peaked at 10.8% in December, the highest since the Great Depression. The Dow closed above 1,000 for the first time on a sustainable basis.

Deep Recession Begins as Volcker Holds Rates Near 20% to Crush Inflation. Fed Chair Volcker held the federal funds rate near 19-20% throughout most of the year in a deliberate effort to break the back of inflation, even as the economy plunged into what was then the worst recession since World War II. Unemployment climbed past 8% and headed toward double digits. President Reagan survived an assassination attempt on March 30. The first IBM PC was released in August, launching the personal computer revolution. Sandra Day O’Connor became the first female Supreme Court justice. The S&P 500 fell 9.7%.

Volcker Shock Pushes Interest Rates to 20% as Reagan Wins Landslide Election. Fed Chair Paul Volcker raised the federal funds rate to a historic 20% in March to combat inflation that had reached 14.8%, the highest since World War II. The aggressive tightening triggered a brief but sharp recession from January to July. Ronald Reagan defeated Jimmy Carter in a landslide, winning 44 states on a platform of tax cuts, deregulation, and smaller government. Gold hit $850 per ounce in January (equivalent to over $3,000 today). Despite the economic turmoil, the S&P 500 surged 25.8% as markets anticipated lower future inflation.

Iranian Revolution Doubles Oil Prices and Sparks Second Energy Crisis. The Iranian Revolution toppled the Shah in February, cutting off 4 million barrels per day of oil production and triggering the second oil shock of the decade. Oil prices doubled from $15 to $31 per barrel. Inflation surged past 11% and gold rocketed from $226 to $512 per ounce as investors fled to hard assets. President Carter appointed Paul Volcker as Fed Chair in August, setting the stage for the most dramatic monetary policy tightening in Federal Reserve history. The Soviet Union invaded Afghanistan in December, further destabilizing global energy markets.

Camp David Accords Bring Mideast Peace While Inflation Accelerates. President Carter brokered the Camp David Accords between Egypt and Israel in September, one of the most significant diplomatic achievements of the era. However, inflation continued accelerating past 7.6% as the second oil shock began to take hold. The Fed raised rates from 6.5% to 10% during the year but remained behind the inflation curve. Congress passed the Revenue Act of 1978, reducing capital gains taxes from 49% to 28%, providing a meaningful boost to investment activity. The S&P 500 barely gained 1.1% in real terms, losing purchasing power against rising prices.

Inflation Accelerates Past 6% as Energy Crisis Saps Economic Confidence. Inflation accelerated past 6.5% as the aftereffects of the 1973 oil embargo continued to ripple through the economy. Natural gas shortages during one of the coldest winters on record forced factory closures across the Northeast and Midwest. President Carter established the Department of Energy in August to coordinate the national response to the energy crisis. The S&P 500 fell 11.5%, one of its worst years of the decade, as investors struggled with eroding purchasing power and uncertain monetary policy. The New York City blackout in July underscored the nation’s aging infrastructure.

Post-Recession Recovery and Bicentennial Celebration Lift Market Confidence. The nation celebrated its 200th birthday on July 4 with a wave of patriotic optimism after the difficult recession of 1973-75. The S&P 500 rallied 23.8% as corporate earnings recovered and consumer spending bounced back. Jimmy Carter defeated Gerald Ford in the November presidential election. Inflation moderated to 5.8% from its 1974 peak of 11%, providing temporary relief. The Viking 1 spacecraft landed on Mars in July. Apple Computer was founded by Steve Jobs and Steve Wozniak in a Los Altos garage. Unemployment remained elevated at 7.7% despite the broader recovery.