Kennedy Slide of 1962 (Flash Crash of 1962)

Definition

The term Kennedy Slide of 1962 is used to describe the decline in the stock market that occurred between December 1961 and June 1962.  Although the exact cause of the Kennedy Slide of 1962 was never isolated, it was thought to be a result of a swift change in investor sentiment.

Explanation

Also known as the Flash Crash of 1962, the Kennedy Slide of 1962 is named after then President John F. Kennedy.  From 1953 through 1960, the United States experienced sluggish growth in terms of a 2.5% annual increase in Gross Domestic Product (GDP).  To boost the economy, federal spending increased 20.4% between 1958 and 1961, driving GDP up by 19.6% in that same timeframe.  This same pattern of growth was seen in the stock market, as the Dow Jones Industrial Average (DJIA) rose 19.51% from January 1960 through December 1961.

The Kennedy Slide would start in December 1961 and the decline would continue through June 1962, resulting in a 27% drop in the stock market's value (as measured by the DJIA), while the S&P 500 Index would fall by nearly 23%.  The crash is attributed to a number of factors, including inflated stock prices and failing investor confidence in the market.  The Kennedy Slide of 1962 was relatively short lived, with the market indexes hitting new highs just fourteen months after bottoming out.

Related Terms

gray swan event, Black Monday, circuit breaker, Black Thursday, Black Tuesday