Wall Street

Wall Street is a geographical location in New York. This street is regarded as the financial capital of the United States. It houses prominent financial institutions like the Federal Reserve Bank of New York and the New York Stock Exchange.

The narrow street runs between East River and Broadway, lined with skyscrapers. Regarding financing, it is known as the most powerful city. It has become a metonym for the U.S. stock market. In Manhattan, Wall Street is surrounded by Broadway, the Empire State Building, Central Park, and the United Nations headquarters.

• Wall Street is the heart of lower Manhattan. The street houses the corporate headquarters of prominent finance players. Manhattan defines trends; the world follows.
• New York is regarded as the financial capital of the world. The volume of financial activity occurring in Manhattan is second to none.
• The Dutch constructed De Waalstraat in New Amsterdam (New York) in 1653. De Waalstraat, when translated, means 'The Establishment.'
• After a rapid economic boom, the U.S. stock market crashed in 1929. Dow Jones fell from 381 in September 1929 to 41.22 in the Summer of 1932.

Wall Street is a physical location situated in lower Manhattan. But the term now represents American trade and economy; historically, prominent financial organizations were established here.

Several businesses have headquarters on this street to take advantage of the recognition. Geographically speaking, the term 'Wall Street,' often refers to the entire district (not just the street). But technically, the intersection between Wall Street and Broad Street lies right at the center of the financial district. Thus, the street is also addressed as lower Manhattan, the financial district, or simply 'downtown.'

Locality plays a huge role in American commerce. Since the street houses numerous financial headquarters, trends are set here—the nation follows. More importantly, The New York Stock Exchange (the financial hub of the American markets) is situated on Wall Street. On the stock exchange floor, shares worth billions of dollars are traded—on behalf of businesses, pension funds, and private individuals.

First, let us look at Wall Street history.

In 1653, the Dutch constructed De Waalstraat in New Amsterdam (New York). Back then, the defense was the objective, not commerce. The Dutch were worried that England might invade this tiny colony. As a precaution, the Dutch constructed a wall around De Waalstraat. Later, the settlement became involved in commercial activities.

Wall Street's future development was set in motion by the Buttonwood Agreement. First, it pioneered contemporary practices—only licensed brokers traded securities (others were not allowed). It catalyzed a chain of events; a stock exchange was established in Philadelphia. The success of the Philadelphia Merchants Exchange led to the construction of The New York Stock. Also, the Buttonwood traders built an Exchange Board.

In the following century, New York grew exponentially. Companies and traders were drawn to the city—they gained access to Wall Street bankers.

Wall Street Crash

Let us look at three significant events that shaped the history of stock markets:

#1 - 1929 Wall Street Crash

This is one of the prominent events in the stock market history. First, there was a sudden boom. Second, Dow Jones Industrial Average Index increased six-fold—from 63 in August 1921 to 381 in September 1929. Dow Jones is an index of 30 prominent companies listed on American stock exchanges.

But by October 1929, prices started declining. By November, it had lost almost half its value. The fall continued into the summer of 1932 and closed at 41.22. This was the twentieth century’s lowest. It took a while to recover; pre-crash heights were attained only in November 1954.

The lengthy speculation preceding the 1929 Wall Street crash was a major contributing factor. Millions invested their savings or borrowed funds to purchase stock during this time. Unfortunately, prices reached unsustainable levels due to the hype—a fall was imminent.

There were other factors; The Federal Reserve increased interest rates in August of 1929 (on top of a minor recession in the summer of 1929). It was a cumulative effect; stock prices declined gradually. By September, investors were in panic; it led to mass-selling. The 1929 crash is now referred to as "Black Thursday."

#2 - The 1987 Crash

The first modern financial crisis broke out on Monday, October 19, 1987. It is infamously referred to as "Black Monday."

Global stock exchanges dropped in a matter of hours—it was a domino effect triggered by market distress. Dow Jones Industrial Average (DJIA) witnessed a loss of 22.6 percent in a single trading session—the worst single-day drop in the stock market's history.

It was the worst U.S. crisis since the Great Depression. The stock market crash was preceded by quick growth—international investors increased their involvement in U.S. markets—U.S. investment firms launched a new product called portfolio insurance, and it gained a lot of traction. So when the decline kicked off, the selling was also rapid.

#3 - The Great Recession

The financial crisis of 2007–2008 resulted in a severe reduction in liquidity. It had a direct impact on the global market. The U.S. housing market collapse is also known as the subprime mortgage crisis.

The expansion started in the 1990s and continued uninterrupted through the recession of 2001 and picked up speed in the middle of the 2000s. As a result, the U.S. witnessed prolonged economic growth; housing construction, housing loans, and property prices rose. So naturally, home mortgages increased.

Trouble started in the first quarter of 2007; housing market prices dropped by 5% nationwide. The prices were exaggerated, to begin with, and the housing market collapsed. Due to the crash, several commercial banks, mortgage lenders, insurance firms, and financial institutions collapsed.

Let us look at Wall Street vs. Silicon Valley vs. Main Street comparisons to distinguish between them.

This article has been a guide to what is Wall Street. Here we discuss it in detail with its history and compare it with main street and silicon valley. You can learn more about it from the following articles -

• High Street Bank
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• Corporate Finance