This Day In Market History: Fed Chair Martin Issues Warning About Too Much Stock Market Speculation

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

What Happened? On May 16, 1967, Federal Reserve chair William McChesney Martin warned about an overheated stock market in a speech commemorating the 175th anniversary of the New York Stock Exchange.

Where The Market Was: The Dow finished the day at 885.80. The S&P 500 traded at 93.14.

What Else Was Going On In The World? In 1967, Dr. Christian Barnard completed the first successful human-to-human heart transplant on 53-year-old patient Louis Washkansy in South Africa. Thurgood Marshall became the first African American U.S. Supreme Court justice. A movie ticket cost $1.25.

A Word Of Warning: Martin’s speech at a Lincoln Center Luncheon in New York took a bleak tone for such a celebratory event. Martin said market speculation had gotten out of control and that type of speculative trading could essentially corner the market for certain individual stocks.

Those who ignored Martin’s warning lived to regret the decision. In the three years leading up to Martin’s speech, the S&P 500 surged more than 14.8%. Three years later, the S&P 500 was down 17.4%.

History seemed to repeat itself in 1996 when Fed chair Alan Greenspan warned of “irrational exuberance” in the stock market within four years of the bursting of the dot-com bubble.