Historical examples
- 1929: the start of the Great Depression; US stocks lost close to 90% by 1932.
- 1987 (Black Monday): the Dow fell about 22% in a single day.
- 2000–2002: the dot-com bust; the Nasdaq fell roughly 78%.
- 2008: the global financial crisis; the S&P 500 fell about 57% peak to trough.
- 2020: the COVID shock; the S&P 500 fell about 34% in roughly a month, then recovered within months.
What causes crashes
Crashes tend to follow a combination of stretched valuations, heavy borrowing, and a trigger that changes expectations quickly, such as a banking failure, a pandemic or a policy shock. Once prices start falling, forced selling and fear can accelerate the drop.
Recovery is not guaranteed to be quick
The 2020 drop recovered within months. After 2000, the Nasdaq took about 15 years to regain its high. After 1929, it took decades in nominal terms. Past recoveries do not predict future ones.
The behavioral side
Many investors lose the most not in the crash itself, but by selling near the bottom and missing the rebound. Some of the strongest single days in market history occurred within weeks of the worst ones.
Key takeaways
- A crash is a rapid, severe, broad market decline.
- Causes usually combine fragility with a sudden trigger.
- Recoveries have ranged from months to decades.