Biggest Stock Market Crashes (1929-2022)

There have been a number of stock market crashes through the years. Some of them have been far worse than others, but they all leave their marks in the industry. People who invest have certainly seen some scary times. That being said, those that have ridden it out have also seen the bounce backs that gradually occur after a market crash.

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We’ve lined up some of the biggest stock market crashes in history from 1929 to 2022. Check out these stories of crashes and the recovery of the markets following them. It’s always good to be informed and understand what the crash and recovery looks like. 

What is a Market Crash?

Let’s start by talking about what a stock market crash is. Just because the market plummets a little doesn’t mean it crashed. There are some specific details that really define a crash. Ultimately, a crash is a prolonged bear market that is triggered by an abrupt and drastic drop in stock prices. 

It will affect the majority of the market and that bear market is going to be in place for an extended timeframe while recovery occurs. It could take years for recovery to happen. The question is can you ride out the recovery or not? If you are close to retirement, you may not be able to hold for 20 years to recover. 

It just depends. 

This crash, or drastic drop in all stock prices in the market, typically occurs in a very short time frame, usually within a single day. 

Now, check out these biggest stock market crashes from 1929 to 2022. 

The 5 Biggest Stock Market Crashes in History

While there are several different eras that have been marked by market crashes, there are some major historical points that really stand out through the years. These are the five that we’ve selected to share with you. 

1. 1929

The stock market crash that happened in 1929 was markedly the worst crash ever recorded in history. It was also the first stock market crash to occur. This was one of the triggering marks of the Great Depression.

This crash was astronomical and the recovery period was 25 years. 

There were some leading signs to the crash, but nothing that fully prepared investors for the crash that happened. On October 28^th and 29^th of 1929, the market dropped dramatically, marking the biggest two-day loss in the history of the stock market. That Monday and Tuesday have been deemed Black Monday and Black Tuesday. 

We have never seen another loss as bad as this one. That time in history is one that should always be remembered. There was mass panic that followed and a total loss on the Dow of 89%. People panicked, many jumped out of the markets, and the financial world was bleak for many years following. 

There was a heavy amount of fear, the staggering bottom peak of 89% down, and the bear market that lasted so long that many didn’t live to see the end of it. In that timeframe, history also experienced the Dust Bowl, World War II, and more. Record numbers of bankruptcies were also filed. 

2. 1987

In 1987, there was a drastic crash that has been called the Black Monday crash. It came just a few short years after the oil crisis in 1973, but it was worse overall in terms of a crash. On that Monday, the Dow fell more than 20%, declining the most that had ever been experienced in a single day. 

While the following days showed slight improvement, the following months showed continued decline that wreaked havoc on the markets. Many of the indexes declined 20% within a month. The Monday was October 19, 1987, and November showed the side effects of that decline. 

While there wasn’t a particular event that led to this crash, there were a variety of factors that are said to have contributed to the crash. The U.S. trade deficit was growing exponentially, trading was turning to a computerized process, and there were a lot of tension factors in the Middle East. 

With the automated trading factors, a large number of sell orders overwhelmed the market. Other investors quickly followed suit acting out of panic. While this was a marked market crash in history, they had a quick recovery period. 

They noticed a rebound of sorts within a couple of months. For those that jumped ship, it was too late for them to ride it out. By 1989, the markets had recovered completely and losses were recouped. 

3. 2000

Do remember much about the turning point of the century? When the world jumped from 1999 to 2000? There was a lot of fear about the computer systems being able to handle the change and what that would do to the world. So many people panicked and prepared for the end of the world as we know it. 

But what happened is everything transitioned just fine. However, during that time, the world experienced what is known as the Dotcom bubble. Tech companies had been rising and they were way over valuated to be sustainable. Their finances didn’t match the valuations and it was only a matter of time before things went south. 

It was a time when technology was just starting to really advance and people were eager to see the new things. They were also eager to invest in these new things that were going to be big. Ultimately, it was the tech stocks that crashed, but it caused a larger market crash to follow. 

This crash was felt primarily by the NASDAQ composite index. It lost more than 75%, coming close to the Dow losses of the Great Depression era. It was more of a market correction for the overvaluation, but the drastic loss certainly hurt investors. 

The real trigger of the Dotcom bubble bursting was Federal Reserve policies that tightened up and reduced capital flow in the markets. Suddenly, a crash was triggered. 

This recovery period was also long and fraught with tension.

While the overall economic environment was not bad, this market crash lasted for 15 years before recovery really occurred. 

4. 2008

In 2008, the market crash experienced was from a whole different sector. Here it was the housing market. Real estate was the driving factor, as were some unethical practices that were finally squashed. 

Several years before that, a number of lending companies were handing out loans to just about anyone. They wanted mortgages to be accessible, so they were lending to people who never would have qualified for credit. They were given higher interest rates and aggressive terms. 

The economy was in a great status at the time. However, because of the lax rules and policies, too many debtors were racking up debt they simply couldn’t afford. This includes individual debtors as well as companies and corporations. They were over extended. 

The increased debt and mortgages were pushing the stock market to new heights and comforts, but it wasn’t going to last. You might know the stories of Bear Sterns, which was an investment bank that failed at the time. There were others with similar problems. 

While Bear Stearns didn’t cause the crash, it was the first domino that led to the spiral. At this crash time, the S&P 500 lost 57%. It was all tied to the lending practices. After that, lending practices tightened up substantially, as did regulations for them. 

While this was a pretty significant crash, it took less time to recover from than some of the other major crashes. Within two years, the markets had pretty much recovered. And from there, the markets stayed strong for a lot of years. 

5. 2020

After so many years of steadfast trading that never resulted in a major crash. There were definitely some major downturns through the years, such as 2010 when there was a defining event known as the flash crash. It didn’t last long though. And you may remember some other times that had market movement that was concerning. 

However, after 2008, there was never a significant crash again until 2020. Many people refer to this particular crash as the COVID crash, but it really is more tied to OPEC than anything else. Yes, the pandemic did have some effects on the market. But the OPEC crash defined it. 

The top names in the export industry started warring on their oil prices and cutting back on production at the same time. The industry was heavily affected by the lack of travel from the pandemic, pushing prices down into extreme lows. 

Most of this crash was caused by global disruptions and arguing, as well as big oil companies that started fighting for the market share that was available. As that passed, we actually saw a positive market for much of the year, which many people tied to the pandemic. 

Both of these events had an impact on the 2020 markets and the total market loss hit somewhere around 35%. Most of the downturn and loss happened in March of 2020 when shutdowns began to occur. 

This time in history also marked one of the fastest recoveries and it was really pretty surprising.

The recovery time is said to be only about 30 days from the initial crash and downturn. More people got into the markets, and more companies started coming up with innovative ways to invest. 

Preparing for Market Crashes

Throughout history, we see crashes like these that mark many historical events. The crash of 1929 has not been repeated, although there have been some major crashes and declines through the years. Nothing has really compared to that crash or the recovery time that was tied to it. 

The truth of the matter is the stock market is heavily cyclical. The events happening in the world can dramatically impact the market. In 2022, we saw major market declines that are certainly concerning, but have not yet been labelled as a market crash. 

You won’t always know when a crash is happening. If you are near retirement and suspect a crash, it may be conscientious to shift to income producing investments that are more conservative. If you have time, it’s a good idea to settle down and ride out the markets. 

These are some things you can do that might help you be prepared for market crashes. 

Beef Up Your Emergency Fund

We always recommend having an emergency fund before you invest. This way you won’t have to worry about the money that is invested being available to you. If you don’t have an emergency fund, or perhaps it needs beefed up a little bit, prioritize that over investing. 

Experts recommend having an emergency fund that is about 10% of your annual income.

This sets aside some cash that you can use should something like a job loss occur. You could also calculate 3-4 months’ worth of earnings to put away if that makes it easier. 

The idea of an emergency fund is to have cash quickly available to you should the unexpected happen. It might be a job loss but it might be something like a medical issue, needing new tires, and other similar things too. 

Reduce Debt

It’s a good idea to reduce your debt holdings, especially if you have things that are high interest. This might include credit cards and high interest loans. If you’re paying more in interest than your investments are making, it could be advantageous to pay down some debt. 

Take the time to look at your debt. Prioritize things that have the highest interest rate and focus your efforts on paying those things off. You don’t necessarily have to pay it off in one day, but you should be making a focused effort to reduce or eradicate that debt. 

While you don’t have to be debt-free to invest, it’s good to find a balance.

If you have high debts, spend time paying them down before you focus those funds to the stock markets. It helps you in more ways than one. 

Diversify Your Portfolio

As you invest in the markets, you should do your best to make sure things are diversified. Having a diverse portfolio is always recommended. It makes you less susceptible to changes in any one part of the market.

Reducing exposure to one spot will make a huge difference over time. 

You can diversify your portfolio and still set it up in a way that works towards your goals. Diversification is simply making sure you are not overly invested into just one holding. 

You’ve probably heard the phrase that you shouldn’t put all your eggs in one basket. This is true in the stock market too. With so many options out there, why not diversify? 

Final Thoughts

There have been several market downturns through the years, as well as some major market crashes. History has always been marked by The Great Depression and the major stock market crash that was felt at that time. No crash since then has been as bad, although we’ve seen some rough times. 

Most of the time, the market dips and then it recovers. With major crashes, it is possible that the market will take years to recover, but it also may only take a few days or a few months.

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