Law of the Market and Stock Market Forecast (1933-1948) | George Marechal

In 1933, incoming US President Franklin D. Roosevelt reached out to Roger Ward Babson for a long-range stock market forecast. Babson—a highly successful entrepreneur, economist, investor, and philanthropist—had become a household name after his prophetic warning on September 5, 1929: "A crash is coming, and it may be terrific." Later that same day, Wall Street declined by 3% in an event known as the "Babson Break." The catastrophic losses of the Great Crash followed shortly after on October 24 and 29, 1929 (Black Thursday and Black Tuesday). By the height of the Great Depression in 1932, the market had hit an all-time low; 75% of its value had been wiped out, rendering shares in many companies virtually worthless. As thousands were ruined and people lost their jobs, savings, and homes, soup kitchens became a staple on street corners.  

 

Alan H. Andrews, Director — The Foundation for Economic Stabilization, Boston, Massachusetts, 1969.

To fulfill President Roosevelt’s request, Babson consulted George Marechal, a then-obscure Canadian mathematician who had recently discovered how the highs and lows of the Dow Jones Industrial Average repeated in predetermined sequences. Ultimately, it was Marechal who produced a 15-year Dow Jones Index Forecast Chart for the Roosevelt administration—a document that proved to be spectacularly accurate. So confident was Marechal in his work that he had the chart copyrighted. His friend Alan H. Andrews, inventor of "Andrews’ Pitchfork," later described it as a "chart no government economist [and] no college professor has enough knowledge to even approach or courage to try to duplicate."

 The top line of price fluctuations is an actual reproduction of a copyrighted fifteen-year market forecast, calculated and drawn in 1933 by George Marechal. The bottom line shows the actual Dow Jones Industrial Average from 1934 to 1948—the same fifteen years projected by Marechal. This comparison, extending through April 1951, was later published by Garfield A. Drew and Edward R. Dewey in Cycles Magazine (October 1962), presenting Marechal’s 1933 forecast alongside actual Dow Jones Index data.

 

In 1962, Edward R. Dewey confirmed that Marechal’s method remained largely unknown. Despite a fund manager’s offer of $20,000 for his secrets—or the alternative proposal to manage a five-million-dollar fund and share the profits—Marechal declined both. He ultimately died at the age of 90 without ever revealing how he calculated market movements with such uncanny accuracy. Nevertheless, it is clear that he utilized a version of Babson’s "Normal Line." Annotations later added to his chart by his friend Alan Andrews indicate that Marechal plotted market turns using what are now recognized as Median Lines. Dewey concluded:

"The important thing about this study [chart of Marechal] is not the exact precision by which it came true, or the amount of money you would or would not have made if you had followed it. The important thing is that it shows that the market has predictable patterns. In other words, that the seeming disorder of market fluctuations really is subject to law, and that this law is learnable."

In 1948, Garfield A. Drew, another friend of Marechal, reproduced the forecast in his book, "New Methods for Profit in the Stock Market." Drew stated that an original copy of the forecast had been in his possession since 1935. Since each year was divided into six parts, he included the actual fluctuations of the Dow Jones Industrial Average in his book by plotting the high and low for each two-month period. Drew commented on the famous chart:

"Clearly, the pattern of the forecast and the actual pattern of the market miss many times in detail and exact timing. Nevertheless, the broad picture of the trends from 1934 through 1947, at least, is remarkably similar. The basic downtrend from 1936-37 to 1942 is plain, and likewise the uptrend from 1942 to 1946, although the latter shows up as a much more zigzag pattern in the forecast than was actually the case. Thus, the year 1944 by itself, for example, appears as a down period, whereas it was really an up year. When the year 1947 ended, the Dow Jones Industrial Average had spent 16 months within a 16% price range. As far as the situation at the time the comparison in [the figure] ends is concerned, it is evident that, if the broad accuracy of the preceding 14 years is to be maintained, 1948 must, on the whole, witness a rising price level. A definite down trend going substantially into new low territory by the year-end would produce a greater discrepancy between the forecast pattern and the actual course of prices than at any other time in the record. The fact remains to be seen at this writing, but, in line with his original forecast made years before, Marechal always insisted that 1946-47 was not a "bear market" but an interruption in a long upward trend comparable to the break and market hesitancy during 1926 in the long upswing from 1921 to 1929.”

 "In this figure the Dow Jones Averages are plotted from 1897 through 1962. On this chart are a number of "resistance" lines. The original worksheets for Marechal's forecast look just about like this chart, except that there were a great many more lines and, thus, a great many more intersecting points. Marechal's secrets consist fundamentally of how to draw the resistance lines and how to select the significant intersections."

 Edward R. Dewey in Cycles Magazine, October 1962.

[George Marechal’s legacy rests entirely on his uncannily accurate 1933 copyrighted DJIA forecast chart, prepared privately for the US government via Babson during the Great Depression. No independent writings by him or official US government publications bearing his name have been found. All available information derives from reproductions and commentary by contemporaries such as Drew, Dewey, and Andrews. The original chart and its worksheets are not publicly available in digital form.]