The S&P 500 has gained 12.65% in 2026 and closed Friday at 7,711.75. A Wall Street Journal column draws parallels between current market conditions and trading patterns from 1901, which preceded the Panic of 1907.
Record Leverage and Trading Activity
Same-day options made up 66.2% of all S&P 500 options volume in July, marking an all-time high according to Cboe. Margin debt has also surged, reaching $1.42 trillion in July according to Financial Industry Regulatory Authority filings, up from $1.02 trillion a year earlier.
In 1901, New York Stock Exchange turnover reached 319%, meaning the entire market changed hands roughly every four months. Historical bucket shops allowed small customers to bet heavily on short-term stock movements without actually purchasing shares.
The 1907 Parallel
The Panic of 1907 was not primarily driven by expensive valuations but by borrowed money and speculative trading. The crisis began with a failed corner on United Copper stock in October 1907. Call money rates spiked from 9.5% to 70%, then to 100% within two days. The Dow lost 40.9% from its December 1906 peak to the November 1907 bottom, according to a National Bureau of Economic Research study.
The 1907 collapse occurred in the shadow banking system, where trust companies held only about 5% of deposits in cash, compared to 25% at national banks. The lack of a lender of last resort intensified the crisis, leading Congress to create the Federal Reserve six years later.
Current Valuation Metrics
The Shiller price-to-earnings ratio currently sits near 42, compared to a long-run average of 17.4 and just under its December 1999 record. Bitcoin has tracked the S&P 500 through recent risk shocks, currently trading near $78,618.
