25 years ago: February 1994

S&P 500: 467.14 (vs. 2731.61 in 02/2019) 10-year U.S. Government Bond Yield: 6.15% (vs. 2.70% in 02/2019) Gold: $381.55 (vs. $1312.40 in 02/2019) Oil: $14.50 (vs. $53.94 in 02/2019) GBP/USD: 1.485 (vs. 1.2932 in 02/2019) US GDP: 7,013 billion (vs. 20,658 billion in 09/2018) US Population: 260 million (vs. 328 million in 2019) 02/03/1994: The Mexican Peso crisis begins. 02/05/1994: Byron De La Beckwith is convicted of the 1963 murder of civil rights leader Medgar Evers. 02/06/1994: The Fed's decision to raise short-term interest rates for the first time in nearly five years pushes the Dow Jones Industrials more than 96 points lower. 02/12/1994: Four men break into the National Gallery of Norway and steal Edvard Munch's iconic painting The Scream.  

50 years ago: January 1969

S&P 500: 98.13 (vs. 2731.61 in 02/2019) 10-year U.S. Government Bond Yield: 6.26% (vs. 2.70% in 02/2019) Gold: $42.70 (vs. $1312.40 in 02/2019) Oil: $3.06 (vs. $53.94 in 02/2019) GBP/USD: 2.3918 (vs. 1.2932 in 02/2019) US GDP: 968 billion (vs. 20,658 billion in 09/2018) US Population: 205 million (vs. 328 million in 2019) 02/10/1969: Heavy snow forced closings of NYSE and ASE, the first such weekday closing by Big Board in this century. Only other all-day closing was Saturday in January, 1948, due also to snow. 02/12/1969: Pittsburgh Stock Exchange members voted merger with Philadelphia-Baltimore-Washing Stock Exchange. 02/26/1969: Federal Reserve restated determination to tighten credit to cool economy.  

100 years ago: February 1919

S&P 500: 8.0471 (vs. 2731.61 in 02/2019) 10-year U.S. Government Bond Yield: 4.70% (vs. 2.70% in 02/2019) Gold: $20.67 (vs. $1312.40 in 02/2019) Oil: $4 (vs. $53.94 in 02/2019) GBP/USD: 4.7575 (vs. 1.2932 in 02/2019) US GDP: 84 billion (vs. 20,658 billion in 09/2018) US Population: 104 million (vs. 328 million in 2019) 02/05/1919: Charlie Chaplin, Mary Pickford, Douglas Fairbanks, and D.W. Griffith launch United Artists. 02/06/1919: General Strike at Seattle. Many strikes and much labor unrest. 02/14/1919: Polish Soviet War: The Polish army attacked Soviet forces occupying the town of Biaroza. 02/21/1919: German socialist Kurt Eisner is assassinated. His death results in the establishment of the Bavarian Soviet Republic and parliament and government fleeing Munich, Germany. 02/25/1919: Oregon places a one cent per U.S. gallon tax on gasoline, becoming the first U.S. state to levy a gasoline tax.  

200 years ago: February 1819

GFD US-100/S&P 500: 0.5752 (vs. 2731.61 in 02/2019) 10-year U.S. Government Bond Yield: 4.65% (vs. 2.70% in 02/2019) Gold: $19.39 (vs. $1312.40 in 02/2019) GBP/USD: 4.384 (vs. 1.2932 in 02/2019) US GDP: 726.677 million (vs. 20,658 billion in 12/2018) US Population: 9.379 million (vs. 328 million in 01/2019) 02/15/1819: Simon Bolivar Palacious became President of Colombia 02/17/1819: The United States House of Representatives passes the Missouri Compromise for the first time. 02/22/1819: Treaty concluded with Spain, ceding Florida to the United States.  

300 years ago: February 1719

UK Government Bond Yield: 4.10% (vs. 1.34% in 01/2019) UK GDP: £80 million (vs. £535 billion in 12/2018) UK Population: 6 million (vs. 66 million in 01/2019) 01/03/1719: Compagnie des Indes shares hit 475 Francs and will rise to 10,000 Francs on November 21, 1719 during the Mississippi Bubble. © 2019 Global Financial Data. Please feel free to redistribute this Events-in-Time Chronology and credit Global Financial Data as the source.

Global Financial Data has added the UK-100 Index to its family of GFD Indices. The UK-100 index (GFUK100MPD) provides a DAILY index of stocks from the London Stock Exchange that begins in 1692 and ends in 1985. The index has a base of 12/31/1983 = 1000 so the index can be linked up to the FTSE-100 index and provide over 325 years of daily data on British stocks. With over 87,000 data points, the UK/FTSE-100 index provides more stock market history than any other index on the planet. The Index is available not only as a price index, but as a return as well.   The GFD UK-100 Index provides an unparalleled history not only of the London Stock Exchange, but of the entire financial world. Hundreds of companies from around the world listed on the London Stock Exchange in the 1800s and 1900s as London funded the growth of the global economy. The FTSE-100 provides daily data back to 1984 and the FT-30 Industrials provides daily data back to 1935. The GFD UK-100; however, provides a daily, market-cap weighted index of British stocks that traded in London from 1692 to 2018 and includes over 87,000 data points to help analysts understand the performance of the stock market over the past 327 years.   We have divided up the history of the London Stock Exchange into four eras: Monopolies (1692 to 1805), Free Trade (1806 to 1914), the Great Reversal (1914 to 1974) and Globalization (1975-). Each of these eras represented different attitudes of the government toward the stock market. This directly affected the performance of stocks, bonds and bills. We noted that the most significant change in the stock market occurred in 1914 when the government began its extensive intervention in the economy and the stock market which continues today. Between 1692 and 2018, stock prices increased at an average rate of 2.00% per annum before inflation and 0.50% after inflation, and with reinvested dividends averaging 4.63% per annum, investors received a total return of 6.72% per year. £1 invested in stocks in 1692 grew to £31.358 million in 2018 and with reinvested dividends grew to £1.817 billion assuming no taxes and full reinvestment. By contrast £1 invested in government bonds grew to £1.208 million between 1700 and 2018 and £1 invested in bills grew to £793,891 between 1694 and 2018.   The equity risk premium over the past 327 years was 2.29%. Whereas most analysis of the dividend yield and equity-risk premium rely upon less than 100 years of data. The GFD UK-100 Index not only provides 327 years of data to calculate the risk premium, but provides information on how it changed over time. The best annual performance was 1975 when the market rose 127.69% and the worst was in 1974 when the market fell 50.61%.   The GFD UK-100 also provides a detailed history of the 25 bear markets that have occurred in London over the past 327 years as well as how the market capitalization increased from under £1 million in 1692 to over £2.5 trillion at the beginning of 2018. The composition of the market has switched from being composed of three companies in the 1700s to one dominated by transport and finance companies in the 1800s to one in which no sector dominates the market today.   London was the financial center of the world from 1692 until 1914 when the cost of fighting World War I forced London to cede the title to New York. London remains the center of Europe’s financial markets today which, despite the current battles over Brexit, it will likely maintain for the rest of the century. The GFD UK-100 index provides a unique record of London’s equity markets over the past 327 years. You can read the full article here.

Global Financial Data has the most extensive database on historical stocks available anywhere in the world.  GFD has collected data on stocks that listed on the London Stock Exchange from the 1600s until 2018.  London was the financial center of the world until World War I, and many companies in emerging markets listed their shares on the London Stock Exchange before a stock exchange even existed in their country. After World War I, many foreign companies listed on the New York Stock Exchange.  Using data from London and New York, we can calculate stock market indices for emerging markets during the 1800s and 1900s before stocks listed on local exchanges and local emerging market indices were calculated. This is one in a series of articles about those countries.  

The Suez Canal Connects the World

There were a number of companies that listed in London and Paris as well as on the Cairo and Alexandria Stock Exchanges in the 1800s and 1900s. The first company for which GFD has data is the Bank of Egypt which traded in London from 1856 until 1910.  Several other companies came along in the 1860s including the Egyptian Commercial and Trading Co. (1863), Societe Financiere d’Egypt (1864) and the Anglo-Egyptian Banking Co. (1865-1920). However, the largest company in Egypt, the Compagnie universelle du canal maritime de Suez (Suez Canal Co.) went public in 1858 and ran the Suez Canal until it was nationalized by Egyptian President Gamal Abdel Nasser in 1956.  GFD has data on the Suez Canal from its IPO in 1862 until 1940. During the late 1800s, the Suez Canal Co. was one of the largest stocks by capitalization that traded on either the Paris or the London Stock Exchange. The Suez Canal was constructed between 1859 and 1869 and was officially opened on November 17, 1869. Dreams of building a canal between the Mediterranean and the Red Sea go back almost 4000 years, but until the 1800s, no one had succeeded in building a useable canal.  In 1856, Ferdinand Lesseps obtained a concession from Sa’id Pasha, the Khedive of Egypt and Sudan to create a company that would construct a canal open to ships from every nation. The Suez Canal Co. was founded on December 15, 1858 with the Egyptian government owning 44% of the shares, and French and Egyptian investors owning the rest. The company issued 400,000 shares at 500 francs ($100) each, giving the company a market cap of $40 million. Work on the canal began on April 25, 1859.  Both the transcontinental railroad in the United States and the Suez Canal were opened in 1869 making it easier to conduct trade around the world. Sa’id Pasha defaulted on government bonds in 1875, and he sold his 44% stake in the Suez Canal Co. to Britain which became the largest shareholders in the canal. The British invaded Egypt in 1882 to suppress the Urabi Revolt and in 1888, the Convention of Constantinople declared the canal a neutral zone under the protection of the British.  The canal was nationalized in 1956 and shareholders were paid off by 1962, though hardly at a rate that was in their favor. As Kindleberger put it, “Said and Ismail were profligate viceroys, borrowing in Europe at high interest rates for consumption, for irrigation schemes designed to serve their own estates, for an extravagant fête to celebrate the opening of the Suez Canal, for badly planned public works. The railroads and Suez Canal benefitted Europe, for example not Egypt, and cost Egypt £12 million for shares ultimately sold to the British government under Disraeli for £4 million. In all, the Egyptian government under Ismail (after 1863) borrowed £53 million, received only £32 million, paid £35 million in debt service, but still owed £52 million on capital account and arrears of interest in 1876 when the government finally defaulted. Marlowe (a nom de plume) observes that it was easy to castigate the Europeans who made every Ismail initiative contribute to their wealth, but Egyptian mismanagement was itself spectacular.” (Charles Kindleberger, A Financial history of Western Europe, London: George Allen & Unwin, 1984, p. 224) Figure 2 below shows the performance of Suez shares between 1862 and 1940. As can be seen, shares in the Suez Canal rose in price from 1858 until World War I, declined in price until the early 1920s, then made a dramatic rise until 1939 when World War II caused the price of Suez Canal Co. shares to crash back to the level of the 1920s.     The Alexandria Stock Exchange was founded in 1883 and the Cairo Stock Exchange in 1903.  The market cap of Egyptian shares that traded in London remained quite high, primarily because of the Suez Canal Co.  In 1937, the market cap of Egyptian shares exceeded $1 billion, although only about $100 million of this was from non-Suez Companies.  Figure 3 shows the performance of all Egyptian shares listed in London from 1856 until 1969.  The index peaked in 1929 and had lower highs in 1937, 1945 and 1955 right before the Suez crisis. Between 1856 and 1969, Egyptian stocks increased in price at an annual rate of 2.31% and 7.55% on a return basis, giving a dividend yield of 5.12%.  But this obscures the huge variance in returns over time. Between 1856 and 1912, Egyptian stocks rose at an annual rate of 6.83% and by 5.82% between 1846 and 1929.  Add on another 5% for dividends Egyptian stocks provided good returns during its heyday, though primarily because of the strong performance of Suez Co. shares. What does the Egyptian stock market look like if Suez is excluded from the index?  To find this out, we calculated an Egypt x/Suez index which is reproduced below.  Figure 4 shows peaks at similar times as the graph above, with the market topping out in 1929, 1937, 1945 and 1955, but the total return is completely different with the index increasing only 0.14% per annum from 1856 to 1961 and 6.37% with dividends reinvested. Between 1856 and 1929, the annual increase in the price of Egyptian stocks was only 2.00% per annum versus 5.82% once Suez stock is included.  In other words, without Suez stock, Egyptian shares behaved just like shares from any other country, fluctuating up and down, but providing little if no long-run return to shareholders.  All the return came through dividends. Egypt did calculate a stock market index of shares that listed in Cairo and Alexandria between 1948 and 1962 when Nassar nationalized a number of Egypt’s companies which is illustrated in Figure 5.  Share trading declined after 1962 and no index is available for Egypt until 1980.  

The Future of Egypt

Egypt is a unique emerging market because of the dominance of the Suez Canal Co. in the Egypt’s market cap. The Suez Canal Co. was a French company with operations in Egypt with the British owning the largest number of outstanding shares.  The Suez Canal Co. played such a prominent role in Paris that David le Blis included it as one of the stocks in their index of 40 shares that traded in Paris between 1852 and 1987. The Suez Canal Co. consistently represented over 75% of the market cap of the Egyptian stock market.  When the Egyptian government nationalized the canal in 1956 and paid it off in 1962, there were few Egyptian shares left for investors to trade in either Egypt or London. Nevertheless, during most of its history, the Suez Canal Co. provided a liquid market which generated decent returns to its shareholders. However, Egypt is still struggling politically to provide the economic foundations that will enable the country to emerge as a developed economy. Whether Egypt can overcome its political problems and become a more market-oriented economy that follows in the footsteps of Israel and creates companies that can make products that investors prize throughout the world remains to be seen.