Going back through stock market history, we have a milestone to celebrate. Forty years ago, the front page of Investor's Daily's debut edition posed the question: "Why A New Business Newspaper?"
In making the argument for its own existence, the snappy explanation noted there was plenty of information on financial markets. So much, in fact, that it led to "confusion instead of clarity." What Investor's Daily — renamed Investor's Business Daily in September 1991 — promised to its new readers was "relevant information" over "random information."
How was this new publication going to get an edge on information? Founder William J. O'Neil already had a successful two-decades-old company under the name William O'Neil + Co. It provided data, research and proprietary stock ratings to hundreds of institutional investors. And he already held two-decade ownership of a prestigious seat on the New York Stock Exchange that he bought at the tender age of 30.
His new goal was to make this "relevant information" available to the masses. That's noble in theory, but tougher in practice.
In The Beginning: A Bull Market Boom
One thing that helped the young upstart gain traction was a favorable stock market beginning in the 1980s.
The 1970s weren't an easy period in stock market history. But the 1980s saw a turn from "stagflation" to growth.
On the inflation front, Federal Reserve Chairman Paul Volker took the bold move of putting the economy in a painful recession in order to tame inflation. In the summer of 1982, the 1970s "malaise" — attributed to President Jimmy Carter — subsided and a new bull market began. This one would last nearly two decades. It would culminate in one of the hottest run-ups in the history of stocks with the birth of the internet, the rise of the Nasdaq exchange and an eventual dot.com bubble in 2000.
When the newspaper launched in 1984, this stock market growth period was in its early stages. President Ronald Reagan was instituting business-friendly economic policy and deregulation. Technology advances brought more computers and automation into the financial realm. Innovations were also coming to the financial markets, including index futures entering the scene in 1982.
Investor's Business Daily Shifts Stock Market Focus
One of the biggest challenges Investor's Daily faced was getting the word out and educating the public. The paper was organized in a very different way than the typical business paper. More than words, O'Neil included charts, data, stock screens and ratings to help guide investors. The paper also excluded information that investors typically saw in financial pages, like price/earnings ratios.
"P/E ratios aren't very relevant for market leaders," O'Neil argued, and he needed the space for his innovative ratings.
But because Investor's Daily was so different, it required lessons in how to use it. To that end, O'Neil hit the road giving free seminars around the country on how to use the paper to find leading stocks and interpret market action. He appeared frequently on the Financial News Network, a predecessor to CNBC, with a regular investing show.
The public's appetite for stock market information was growing. O'Neil published the first edition of his bestselling book, "How to Make Money in Stocks." Oliver Stone came out with the movie "Wall Street." Companies were starting to do away with traditional pensions. Workers were coming to realize that rather than a reliable pension check, they might have to rely on stock market growth to fund retirement from a 401(k) or other savings.
Black Monday Stock Market Crash
As strong as the 1980s were for stocks, they weren't without challenges. A stock market crash on Oct. 19, 1987, was an important moment in stock market history. It became known as Black Monday. Remember that innovation of index futures in 1982? They offered an easy way for institutional investors to hedge portfolios. Many institutions were using similar computer models for how much insurance was appropriate to manage risk.
As market levels were hit on the downside, it created a cascading effect. Each level hit on the downside led to more models that suggested more selling. It all knocked markets to the next level on the downside and kept feeding on itself. At the end of the day, the Dow Jones Industrial Average was down more than 22%.
O'Neil himself was minimally invested heading into that day. The reason? The market started a downtrend over the summer and wasn't in a position for buying, according to his investing rules. He wanted to make sure these market insights were taught to Investor's Daily readers.
As ugly as the day was and as much as it shook investor confidence, the bull market marched on. The 1990s saw one of the strongest and steepest inclines in stock market history.
The Rise Of The Nasdaq In Stock Market History
In 1991, in an effort to broaden its appeal and attract more advertisers, Investor's Daily changed its name to Investor's Business Daily. The focus on the stock market didn't change, and there was plenty to report.
The 1990s saw a technology explosion. Personal computers, the internet, software companies and databases all provided massive productivity gains for the economy. For the stock market, that created a host of initial public offerings, or IPOs, as businesses looked to fund these new ideas.
The exciting new companies were what made up the "New America," in O'Neil's estimation. They were important enough to get expanded coverage in the newspaper. Over the course of the 1990s, the Dow Jones Industrial Average saw dramatic shifts in components. American Can Co., Bethlehem Steel, Goodyear and Sears Roebuck gave way to Hewlett-Packard, Microsoft, Intel and Home Depot.
Meantime, the market itself was changing along with these New America companies. Power began to shift from the New York Stock Exchange to the newer National Association of Securities Dealers Automated Quotations, commonly known as the Nasdaq.
Intel had its IPO on the Nasdaq back in 1971, just a few months after the exchange's debut, and the 1990s saw its importance skyrocket along with the Nasdaq composite index price.
Access for the retail investor also expanded. Charles Schwab launched online trading in 1994 and it lowered costs and made trading easier for investors. The online influence was so strong that when Charles Schwab stock broke out of a cup-with-handle base in October 1998, it looked more like the move of America Online than other brokerage firms.
Rather than call a broker and have a trade routed through a specialist on the NYSE floor, more trades were getting filled electronically, faster and cheaper. As the 1990s came to a close, IBD's masthead grew to a circulation over 300,000. That was also just as the stock market topped out and went through one of the worst declines in stock market history, second only to the 1929 crash.
Stock Market History: Changing Market Mechanics
Like many bubbles before it, the dot.com bubble brought a wave of speculation to a grinding halt. The Nasdaq composite soared to more than 5,000 at its March 2000 top, then tumbled nearly 80% over the next three years. Companies that made traders fortunes at a dizzying speed took those fortunes away even quicker. Many went out of business.
Market mechanics saw some big changes during that time as well. Regulation Fair Disclosure was introduced at the end of 2000. It required public companies to disclose material information to all investors at the same time. Before the regulation, companies would at times selectively disclose elements of their business to certain analysts or institutional investors. The extra information and guidance allowed them to adjust expectations between earnings reports.
After Reg FD, market reactions to earnings became more volatile. Analysts had to quickly adjust valuation models when the numbers came out. A frenzy of trading commenced outside the normal trading hours in either the premarket or aftermarket action.
9/11 Terrorist Attack Moves Trading From NYSE Floor
More change was coming. On Sept. 11, 2001, a terrorist attack took out the Twin Towers of the World Trade Center. Additionally, the attack altered the way the stock market functioned. It became clear, after the U.S. stock market had to shut down for days, that having redundancies was necessary for filling trades. More decentralization away from the physical floor of the NYSE seemed prudent.
Just before then, an important shift took place from stocks trading in fractions to decimals. The intention was to minimize the spreads between the bid and ask on stocks. That squeezed the profit margins of the market makers and created an opportunity for electronic and algorithmic trading to become a bigger part of the daily volume.
Along with prior steps, the process of placing a trade had completely changed. Throughout stock market history, an open-outcry system took place on the trading floor. Under the old model, you made a phone call to your broker, who sent your order to the floor for trading, and then you received your price later in the day, along with a hefty commission. And with the trades occurring in fractions, you hoped that you didn't have to pay much more than 12 cents to a quarter per share on the spread.
With online trading, you could place an order with the push of a button. Routing was sent to multiple exchanges simultaneously instead. Executions came down to microseconds. Commissions and spreads shrunk.
Investor's Business Daily: Instruct And Inform
In 2000 to 2002, investors were despondent staring down the barrel of a 78% correction — one of the worst in history — in the Nasdaq composite due to the dot.com crash. You would think a stock market newspaper would struggle. And you would be right. Circulation dropped over the course of the next couple of years as investors took losses and turned away. Those who remained saw multiple stock market rally attempts turn around and fail quickly.
O'Neil went into education mode. He added a new book to the IBD library, "The Successful Investor: What 80 Million People Need to Know to Invest Profitably and Avoid Big Losses." The purpose was to help people understand what went wrong in their trading and how to fix those errors with sound rules. O'Neil also expressed in the book that learning the rules would help investors take advantage of the market recovery.
He also took the time during the bear market to make changes to the paper. As always, O'Neil's intention was to help investors find leading stocks quicker and use rules in their market analysis. As the market roared back to life in March 2003, the newly retooled IBD was able to bring to light the next crop of leaders.
A Global Financial Crisis Starts With Housing Bubble
All the instruction in the world can't stop human nature. A bubble in the housing market saw the creation of new loan products and ways to package mortgages, specifically in the subprime space. When the house of cards came down, a global financial crisis and the Great Recession followed.
Whereas the dot.com bubble saw the destruction of many upstart companies, the Great Recession crippled some hundred-year-old institutions. Lehman Brothers closed its doors. Bear Stearns closed and was sold to JPMorgan Chase. Merrill Lynch went to Bank of America.
The S&P 500 saw a 57% drop from its 2007 peak. The plunge was especially concerning for the baby boomer generation. As they approached retirement age, and in some cases recovered back to the 2000 peak, more than half their investments evaporated before their eyes.
O'Neil kept the education coming with the release of the fourth edition of "How to Make Money in Stocks." For this edition, he started the first chapter with 100 charts of some of the best-performing stocks of each market cycle throughout stock market history. It started with Richmond & Danville, a rail company from the Civil War, all the way up to Apple. It was also another way to remind people that after a crisis, the recovery periods offer great opportunities.
Lesson Of Stock Market History: Adapt Or Die
The next decade offered plenty of leading stocks to choose from. It was a time of low interest rates, quantitative easing and a recovering economy. But the change in market mechanics was still cropping up from time to time. Algorithmic trading took some blame for a "flash crash" on May 6, 2010, and then a tiny version on Aug. 24, 2015. The greater speed of trading brought by technology had its downsides when it outpaced human supervision.
The next decade was also a time of some big transitions for IBD.
In 2014, IBD celebrated its 30th anniversary. In a note to readers on the front page, O'Neil stressed why education on the stock market was so important. "Learning to invest is a lifelong skill no one can ever take away from you," he wrote. He retired shortly after the anniversary and passed the baton to his son, William "Scott" O'Neil. The decade since then has required some hard decisions.
The creative destruction described by economist Joseph Shumpeter is an unforgiving principle: Adapt or die. Some of the giant stocks in market cap took on the task. Microsoft went from relying on operating systems to cloud computing. Adobe shifted to a subscription as a service model. Apple went from a computer company to getting the largest share of its revenue from mobile phones. By contrast, however, Blackberry never reclaimed its former glory.
Investor's Business Daily Evolves
In 2016, IBD had to make its own changes. The paper went from a daily publication schedule for the physical newspaper to a weekly print schedule and a sharper focus on online publishing. Many of the newspaper features still appeared daily, with digital updates on Investors.com, which launched in 2000. But it was a big shift in the business and one that ultimately allowed IBD to stand and grow on its own.
With the addition of web-based investing products like Leaderboard and SwingTrader, IBD was able to give more real-time education to subscribers. In an environment that saw media companies closing their doors, the additional products allowed IBD to survive and thrive with an increased digital presence.
That growth and increased digital footprint came with its own pains. Investors.com serviced a readership in the millions. Unfortunately, its infrastructure wasn't designed for that kind of traffic. When the Covid-19 pandemic hit, that infrastructure was a pain point.
A New Chapter Goes Live
In November 2019, IBD took its education commitment to the next level when it launched a daily investing show, "IBD Live." Starting 10 minutes before the stock market open, IBD staff and guests walked investors through the first 90 minutes of the market action. Presenters not just shared stock ideas but discussed investing principles like risk management, market analysis and position sizing.
A few months later, an unprecedented shutdown of the country happened in response to the spread of Covid-19. Though the market initially crashed in March of 2020, it snapped back as emergency measures helped stabilize and stimulate the economy.
A lot of the stimulus measures found their way into the stock market. A phenomenal recovery took place. As more people found ways to work remotely, Zoom became a household name. The new "IBD Live" show already had a leg up with its earlier adoption of the platform. Investors.com and related products also saw increased traffic.
While the increased traffic was good for revenue, it strained an infrastructure already at its breaking point. Instead of creating that costly infrastructure on its own, another potential solution was to move to an established media giant with an infrastructure already in place.
On May 4, 2021, the sale of Investor's Business Daily to the Dow Jones division of News Corp completed. News Corp previously bought Dow Jones and The Wall Street Journal in 2007.
What's Next For IBD And Stock Market History
So where does IBD go from here? With so much stock market history behind us, what do the next 10 years look like as we move toward our 50th anniversary? Founder O'Neil established a culture at IBD of never resting on your laurels. A reasonable expectation is that things will continue to change. One of our sayings around the office is that we are "always in beta," or looking for ways to improve.
Our pillars of investing — fundamental, technical and market analysis along with risk management — tend to remain constant. But we are always looking at ways to make those pillars more accessible to our readers.
Artificial intelligence holds the promise of changing productivity in the way that computers and the internet did in our first 20 years. That could create new stock leader opportunities and new ways of producing information. At the very least, you can expect an overhaul of IBD's 197 Industry Groups.
But that technology may come with its own growing pains, as we've seen with technology-induced crashes.
With the resources of News Corp, we are looking at upgrades to premium products like MarketSurge. You can also expect that at the end of the day, our changes will continue to fulfill our ultimate goal of helping customers make more money in the stock market.
Stay tuned.
Justin Nielsen is on his 27th year at IBD and was an assistant to William O'Neil from 1999 - 2014. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
