This Day In Market History: John Galbraith Congressional Testimony Angers Investors

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On March 8, 1955, Harvard economics professor John Galbraith told the Senate Banking Committee the stock market was overheating, sending the Dow crashing 2%.

Where The Market Was: The S&P 500 was trading at 36.58 and the Dow was at 409.13.

What Else Was Going On In The World? In 1955, the U.S.S. Nautilus became the first operational nuclear-powered submarine and Jonas Salk produces the world’s first safe and effective polio vaccine. A ladies swimsuit cost $12.95.

Market Reacts To Testimony: Investors were quick to react to Galbraith’s claims that the U.S. stock market had been inflated by speculation. His comments were carried live on national radio, and the stock market began selling off even while his testimony was ongoing.

Galbraith even drew comparisons to the great stock market crash of 1929, warning that “there are similarities between 1929 and 1954 which are certainly interesting and possibly disturbing.”

“What has happened before so many times can obviously happen again,” he said.

Galbraith urged the government to implement additional regulation, including higher taxes, on stock speculators.

In the three years prior to Galbraith’s testimony, the S&P 500 had gained 54.2%. In the three years following his testimony, the S&P 500 index gained another 15%.

The market lost $3 billion in market capitalization on the day of Galbraith’s testimony. Galbraith broke his leg skiing just days later and reportedly received letters from angry investors telling him that their prayers had been answered.