Stock Market Crashes in History: 1929, 1987, 2000, 2008, and 2020

A stock market crash is a sudden, steep fall in share prices across the whole market, usually 20% or more within days or weeks. History’s biggest crashes ranged from a 34% fall that recovered in five months (2020) to an 89% collapse that took 25 years to regain its old peak in price terms (1929).

In short: a crash is measured by two numbers. The drawdown is how far an index fell from its peak to its lowest close. The recovery time is how long it took to close above that old peak again. Both vary enormously from one crash to the next, which is the main lesson of the history: the size and duration of the next one cannot be read off the last one.

The numbers at a glance

These figures use closing prices of the index named, in nominal terms, without dividends. Dividends and inflation change the picture, as discussed below.

Crash	Index	Peak (close)	Trough (close)	Drawdown	Back above old peak
1929	Dow Jones Industrial Average	381.17 (Sep 3, 1929)	41.22 (Jul 8, 1932)	about -89%	Nov 23, 1954 (about 25 years)
1987	Dow Jones Industrial Average	August 1987	October to December 1987	-22.6% in one day	less than 2 years
2000	S&P 500	1,527.46 (Mar 24, 2000)	776.76 (Oct 9, 2002)	about -49%	May 30, 2007 (about 7 years)
2000	Nasdaq Composite	5,048.62 (Mar 10, 2000)	October 2002	about -78%	Apr 23, 2015 (about 15 years)
2008	S&P 500	1,565.15 (Oct 9, 2007)	676.53 (Mar 9, 2009)	about -57%	Mar 28, 2013 (about 5.5 years)
2008	S&P/TSX Composite	15,073 (Jun 18, 2008)	March 2009	close to -50%	Jun 18, 2014 (6 years)
2020	S&P 500	3,386.15 (Feb 19, 2020)	2,237.40 (Mar 23, 2020)	about -34%	Aug 18, 2020 (about 6 months)

Sources: the Federal Reserve History essays on the 1929 and 1987 crashes; index closing levels as published by S&P Dow Jones Indices, Nasdaq, and TMX, as reported at the time.

How to calculate a drawdown

Drawdown is simple arithmetic: (trough minus peak) divided by peak.

For 2008: (676.53 - 1,565.15) / 1,565.15 = -888.62 / 1,565.15 = -56.8%.

The recovery is harder than the fall suggests. To get from 676.53 back to 1,565.15, the index had to rise 1,565.15 / 676.53 - 1 = 131%. A 50% loss needs a 100% gain to break even. An 89% loss, like 1929, needs a gain of roughly 800%. That asymmetry is why deep drawdowns take so long to recover.

1929: the Great Crash

The Dow Jones Industrial Average closed at a then-record 381.17 on September 3, 1929. In late October it collapsed: according to the Federal Reserve’s history of the crash, the Dow fell nearly 13% on Monday, October 28, 1929, and nearly 12% more the next day, Black Tuesday.

That was only the start. The market kept sliding through the early years of the Great Depression and bottomed at 41.22 on July 8, 1932, about 89% below the peak, the lowest close of the twentieth century. The Dow did not close above its 1929 high until November 23, 1954.

What drove it: a speculative boom in the late 1920s, heavy use of borrowed money to buy shares (margin buying with small down payments was common), followed by a banking crisis, falling output, and policy mistakes that turned a crash into a depression.

What changed afterwards: the Securities Act of 1933 and the Securities Exchange Act of 1934, which created the SEC and modern disclosure rules, and federal margin requirements. See how stock markets are regulated.

A caveat on the 25 years. That figure is for the price index alone. Prices across the economy fell during the Depression, and stocks paid substantial dividends throughout, so an investor who reinvested dividends recovered in real (inflation-adjusted) terms considerably sooner than 1954. The 25-year figure is real for the index, but it overstates how long a dividend-reinvesting holder was behind.

1987: Black Monday

On Monday, October 19, 1987, the Dow fell 508 points, or 22.6%, in a single session. It remains the largest one-day percentage drop in the Dow’s history. The S&P 500 fell about 20% that day.

What makes 1987 unusual is what happened next: very little. There was no recession. The Federal Reserve’s history notes that on October 20, Chairman Alan Greenspan affirmed the Fed’s “readiness to serve as a source of liquidity,” and the Fed encouraged banks to keep lending to securities firms. The Dow regained 57% of the Black Monday loss within two trading sessions, and US markets were back above their pre-crash highs in less than two years.

What drove it: stretched valuations after a strong run, rising interest rates, and selling that fed on itself, including “portfolio insurance” strategies that sold index futures as prices fell, and trading systems that could not keep up.

What changed afterwards: exchanges introduced circuit breakers that halt trading during extreme declines. Under current rules, market-wide halts are triggered when the S&P 500 falls 7%, 13%, and 20% from the prior close.

2000-2002: the dot-com bust

Through the late 1990s, investors poured money into internet and technology companies, many with little or no profit. The Nasdaq Composite, heavy in technology stocks, closed at 5,048.62 on March 10, 2000. The S&P 500 peaked at 1,527.46 on March 24, 2000.

The fall was slow rather than sudden: a grinding bear market over two and a half years, worsened by a recession and the September 11, 2001 attacks, and by accounting scandals at Enron and WorldCom. The S&P 500 bottomed at 776.76 on October 9, 2002, a drop of about 49%. The Nasdaq lost about 78% from peak to trough.

Recovery times diverged sharply. The S&P 500 closed at a new record of 1,530.23 on May 30, 2007, about seven years later. The Nasdaq did not close above its 2000 peak until April 23, 2015, fifteen years later.

In Canada, the bust was dominated by one company. Nortel Networks had grown to roughly a third of the value of the TSE 300 index at its 2000 peak, so its collapse dragged down investors who thought an index fund made them diversified.

The lesson: valuation matters, and the index you hold matters. A broad index recovered in seven years; a technology-heavy one took fifteen. See diversification explained.

2007-2009: the global financial crisis

The S&P 500 closed at 1,565.15 on October 9, 2007. Over the next 17 months, a collapse in US housing prices exposed banks and other institutions that had borrowed heavily against mortgage-related securities. Bear Stearns was rescued in March 2008, Lehman Brothers failed in September 2008, and credit markets froze worldwide.

The S&P 500 bottomed at 676.53 on March 9, 2009, down about 57%. It closed above its 2007 record on March 28, 2013. In Canada, the S&P/TSX Composite peaked at 15,073 on June 18, 2008, lost close to half its value by March 2009, and closed at a new record of 15,109 on June 18, 2014.

What drove it: leverage, opaque mortgage securities, weak lending standards, and a banking system that turned out to be far more interconnected than anyone had assumed.

What changed afterwards: the Dodd-Frank Act in the US, higher bank capital requirements internationally, and central clearing for many derivatives.

2020: the COVID-19 crash

The S&P 500 closed at a record 3,386.15 on February 19, 2020. As the pandemic spread and economies shut down, it fell about 34% in just over a month, closing at 2,237.40 on March 23, 2020. Daily moves were extreme, and the market-wide circuit breakers created after 1987 halted trading several times in March.

Then came an equally fast recovery, helped by aggressive interest-rate cuts, Federal Reserve asset purchases, and large government spending. The S&P 500 closed at a new record of 3,389.78 on August 18, 2020, about six months after the peak. It was the shortest bear market in the index’s history.

The lesson: the 2020 crash was terrifying while it happened. People who sold near the March low locked in losses that people who held recovered within months. That says nothing about how the next crash will go, but it shows why decisions made at the bottom of a panic are often regretted. See investor behaviour mistakes.

What can go wrong when reading crash history

Survivorship. US market history is the history of a market that did well. Some national markets, such as Japan’s after its 1989 peak, took decades to recover in price terms.
Nominal vs real. Recovery dates in price terms ignore dividends and inflation. Including dividends usually shortens recovery; adjusting for inflation usually lengthens it.
Averages hide range. “Bear markets last about a year” is an average of very different events. The range in this article runs from six months to 25 years.
Index choice. The same crash looks different in the Dow, the S&P 500, the Nasdaq, and the TSX. Know which one your money actually tracks.

The short version

Five crashes, five different shapes. 1929 was an 89% collapse with a 25-year price recovery. 1987 was the biggest single-day fall, recovered in under two years. 2000-2002 was a slow bust that took the S&P 500 seven years and the Nasdaq fifteen to recover. 2008 cut the S&P 500 by 57% and took five and a half years. 2020 fell 34% and recovered in six months. Each one led to new rules, and none of them told investors in advance what the next one would look like. For definitions of corrections and bear markets, see bull and bear markets.