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This Day In Market History: Elaine Garzarelli's Infamous Bear Call

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This Day In Market History: Elaine Garzarelli's Infamous Bear Call

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

What Happened? On this day in 1996, Wall Street analyst Elaine Garzarelli made an ill-timed prediction that the U.S. stock market would crash 15 to 25%.

Where The Market Was: The Dow Jones Industrial Average closed the day at 5,346.55 and the S&P 500 traded at 626.87.

What Else Was Going On In The World? In 1996, Prince Charles and Diana, Princess of Wales got divorced. Bovine Spongiform Encephalopathy, also known as “Mad Cow Disease” hit British farms. American workers earned an average of $36,300.

Garzarelli’s Bear Call: Garzarelli gained some notoriety on Wall Street back in 1987 when she predicted an imminent collapse of the U.S. stock market on October 12, just a week prior to the 22% Black Monday crash. Garzarelli founded her own business, Garzarelli Research, in 1995 and had been ranked as Wall Street’s top quantitative analyst for 11 consecutive years in Institutional Investor magazine’s poll.

On July 23, 1996, Garzarelli suddenly dropped her 6,400 target for the Dow and told her clients the market would soon drop between 15 and 25%, a move suggesting Dow 4,300. The call sent the Dow down from a 43-point gain at around noon to finish the day down 44 points.

Garzarelli’s call proved to be way off the mark. In the month that followed, the Dow gained 6.3% and in the six months following the sell call, the Dow was up another 27%. In fact, Jason Zweig notes the Dow has never come within 1,000 points of 4,300 since Garzarelli’s infamous call.

 

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