Duration Of The Bear Markets And Percentage Drops of S&P500 During The Last Century
S&P 500 percentage drops and duration of declines for the last 15 bear markets
Bear markets are something inevitable and they are even good for the stock markets because they regulate and align it aligned with reality to ensure the most optimal allocation of capital in the changing economic environments. Bear markets come and go, and they will proceed to do so for the times markets exist. This is why it’s extremely important for any investor, trader, and market participant to know bear markets well so they can take advantage of them whenever they occur.
Here is a nice picture showing the average duration of the last 15 bear markets and the percentage drop the S&P500 stock index fell during these declines.
More About Some Of The Worst Stock Market Crashes
1929 – 86% Drop – The crash that started Great Depression
On October 29th, 1929 the world experienced a financial event that would come to be known as “Black Tuesday”. On that day, the United States economy plummeted into chaos, sending shockwaves around the world. This one day was so impactful on the global economy that it has gone down in history as one of the most significant financial disasters of all time.
The cause of Black Tuesday stemmed from economic instability across America and much of Europe in early 1929. Many investors had begun buying up stocks and bonds, believing their value would keep increasing and creating more money for themselves along the way – a practice known as ‘buying on margin’. The idea was that if these investments paid off they could generate huge returns while only investing minimal amounts upfront. The stock market responded well to this influx of new cash but with optimism came speculation, with many putting too much trust into investments they knew little about or even ones that had underlying problems such as being overvalued or companies going bankrupt overnight due to widespread fraud or mismanagement by their respective CEOs.
This over-speculation eventually caught up with Wall Street; when investors became fearful about potential losses and started selling off assets at an alarming rate, panic spread quickly throughout the markets leading to an unprecedented sell-off on Black Tuesday – where nearly 16 million shares were sold during a single session – leading to massive losses amounting billions of dollars for stock traders and investment banks alike. As faith in these stocks evaporated so did consumer spending causing business failures across industries ranging from farming to banking and ushering in what we now refer to as the Great Depression.
1937 Recession of 1937-38- 54% Drop
On May 6th, 1937, the U.S. stock market experienced its largest one-day crash in history. The Dow Jones Industrial Average plummeted 11 points, representing a 9% decline in market value and triggering a steep recession that lasted over two years. The stock market crash of 1937 marked the end of an eight-year economic boom and ushered in an era of much greater government regulation for American financial markets.
With real GDP getting down by 10 percent and unemployment rising to 20 percent, however, it was less severe than the recessions from 1920 and 1929.
At the time of the crash, prices on Wall Street had been rising steadily since 1929 and investors were confident that stocks would continue to increase indefinitely. The optimism was reinforced by a number of factors such as robust corporate earnings, low unemployment rates, and sustained growth in consumer spending throughout most of 1936 and early 1937. But beneath this rosy exterior was trouble lurking; declines in capital investment spending caused production to slow down significantly during late 1936 and signs emerged that inflationary pressures were on the rise due to increased wages for factory workers coupled with federal stimulus measures initiated by President Roosevelt’s New Deal policies earlier in his term.
In March 1937 these conditions collided to create a perfect storm – panic selling began as fears spread among investors who no longer felt secure about their investments with all these economic challenges facing them at once; this sent share prices plummeting which snowballed into further selling as people attempted to minimize their losses before it was too late; banks suffered huge losses due to margin calls on loaned out stocks held by speculators who couldn’t afford them anymore while lenders sought repayment from borrowers who were unable or unwilling to pay back loans after suffering such heavy losses themselves from selling shares prematurely during the panic selloff at its worst stage.
The harsh reality is that when people panicked they chose to not just flee away from investing in assets, but also drastically reduce consumption which affected overall macroeconomic figures negatively like GDP going down sharply because now there was less demand for goods/services. This coupled with business uncertainty regarding future prospects (due largely to fear rather than real fundamentals) meant even less investment was made until eventually, everyone hit rock bottom due to only being able to sell what little they had left at any given price. That added even more downward pressure onto already depressed prices once financial and real industries.
1946 – 30% drop
The Crash of 1946 is one of the biggest market crashes in history (until then 🙂 ). It occurred on May 28th, 1946 when stocks crashed and fell more than 12 percent in just a single day. It marked the end of an 11-year bull market and was the final chapter in a series of economic troubles that had begun with World War II.
In the years prior to The Crash, Americans had gone through massive changes due to WWII. Rationing was widespread, wages were frozen and unemployment had skyrocketed. With so many people out of work, there was a lack of money circulating within the economy which caused prices to drop sharply and corporations’ profits to suffer significantly. This led to massive debt levels as companies tried desperately to stay afloat while barely making ends meet—and investors started fleeing from stocks as they sensed a potential disaster on the horizon.
On May 28th, investors started selling off their shares at record speeds causing panic among buyers who followed suit and also began selling their holdings at record speeds driving stock prices down even further – this created an avalanche effect that saw panic spread across Wall Street for days afterward until The Crash eventually ended by June 1st with stocks still down more than 12 percent from where they began before everything started falling apart.
It took several years for The Crash’s effects on America’s economy to fully recover – it wasn’t until 1949 when things finally stabilized again after Congress passed laws such as The Employment Act Of 1946 that helped get people back into work by creating jobs programs along with other measures designed for growth and stability in markets such as banking reforms/insurance policies, etc.
1956 – 22% drop
The stock market crash of 1956 was a sharp decline in the value of stocks that occurred on August 27, 1956. The Dow Jones Industrial Average dropped 16.45 points to close at 615.89, the lowest level since April 1951. The crash was caused by a combination of political and economic uncertainty in the United States and abroad, as well as changes in market conditions.
The first signs of trouble began in late July 1956 when the Federal Reserve raised interest rates to combat inflationary pressures caused by increased spending on defense and foreign aid programs during the Korean War. This increase in rates had an immediate effect on stock prices; prices fell more than 10% from their peak before beginning to recover shortly thereafter.
On August 27th, stocks fell sharply as news emerged about political unrest occurring around the world due to increasing tensions between East and West blocs following new Soviet threats against Yugoslavia’s independence declaration earlier that year. With geopolitical concerns mounting and investors increasingly uncertain about the outlook for stocks, selling activity intensified throughout that day resulting in an overall market drop that shocked many observers who had been bullish on stocks prior to this point.
In response to this event, policymakers enacted several measures aimed at stabilizing stock prices including raising margin requirements for securities brokers – which meant higher borrowing costs for traders – and suspending trading temporarily during periods of extreme volatility or price declines (which has since become known as circuit breakers).
1962 – 28% drop – ‘Flash Crash of 1962’
The stock market crash of 1962 was a financial crisis that sent shockwaves through the global economy. On May 28th, 1962, the Dow Jones Industrial Average plunged 9.2% in what became known as the “Flash Crash” or the “Kennedy Slide” after then-President John F. Kennedy. The Flash Crash sparked one of the worst weeks in Wall Street history, with losses totaling more than 22%.
This sharp decline was triggered by a combination of factors including rising inflation and interest rates, overvalued stocks, and investor concerns about political uncertainty in Cuba following the Bay of Pigs invasion. All these issues combined to create a perfect storm for Wall Street and resulted in millions of investors selling their stocks at panic prices in order to avoid further losses.
The consequences were felt around the world: business confidence dropped significantly; millions were wiped out from their investments, and it caused an economic recession that lasted through most of 1963. In addition, it reinforced investors’ negative sentiment about equities for years afterward as they became increasingly risk-averse with little appetite for stock investments at all.
Fortunately, conditions quickly began to improve due to President Kennedy’s recovery program which included tax cuts and public works projects aimed at stimulating economic growth and restoring investor confidence levels by creating jobs and increasing wages throughout America during 1963–1965. His policies also helped spur an upswing on Wall Street as well – soon after his death in November 1963; stocks began to rise again until they reached pre-crash levels just three months later thanks largely to his reforms which ultimately put America back on its feet economically once again.
Lasting 23 months, dramatic rise in oil prices, the miners’ strike, and the downfall of the Heath government.
1987 – The Black Monday
The stock market crash of 1987 was a significant market crash that occurred on October 19th, 1987. This crash, often referred to as “Black Monday”, saw the Dow Jones Industrial Average (DJIA) drop by 22.6% in one day. The S&P 500 and Nasdaq Composite indexes also plummeted in value by 20.4% and 11.4%, respectively.
The cause of this catastrophic decline has been attributed to a combination of factors such as excessive speculation, computer-based trading errors, portfolio insurance triggers, overvaluation, and misinformed investors who made the wrong decisions in anticipation of a possible crash similar to the one which occurred in 1929 during the Great Depression.
Prior to Black Monday, markets were already showing signs of vulnerability due to rising interest rates which began increasing since mid-1986 as well as concerns over inflationary pressures within the US economy resulting from President Reagan’s massive military spending program aimed at financing his Cold War policy against Soviet Union known as Reaganomics – all of which had been artificially boosting markets since 1983 but could not sustain them in light of rising interest rates and inflationary pressure.
By October 1987 when Black Monday hit home suddenly triggering a severe panic selloff wiping out nearly $1 trillion dollars worth of wealth virtually overnight globally leaving many investors stunned. While stock brokers and analysts scrambled for explanations for what had just happened when their livelihoods seemed decimated right before their eyes overnight without much warning or time for corrective actions that could have saved them from major losses.
The early 1990s recession began in July 1990 and ended in March 1991. Comparatively short-lived and relatively mild, it contributed to George H.W. Bush’s re-election defeat in 1992. Following another recession just three years prior, the collapse of the savings-and-loan industry in the mid-1980s, and the U.S. Federal Reserve’s interest rate increase in the late 1980s, this recession was sparked by Iraq’s invasion of Kuwait in the summer of 1990.
2000 – The Dot Com Crash
At its peak in March of 2000, there were over 200 tech companies listed on the Nasdaq index with a combined value of $6.7 trillion USD. But within two years those same companies were worth less than a quarter of their former value. Many small startups were particularly hard hit by this crash, some even going bankrupt as a result.
The root causes of this crash vary depending on who you ask but it was likely caused by an overheated market that was driven too quickly by venture capital investments during a period called irrational exuberance. Companies raced to list their shares as rapidly as possible in order to make quick profits from eager investors who saw huge potential for growth in these businesses without properly researching them or considering potential risks beforehand.
This allowed many unsustainable and unsuccessful companies to gain listings which only served to fuel the market further until it eventually crashed due to high valuations that weren’t supported by actual financial performance or viable business models for many companies involved in this bubble economy. At the same time, it also created what some call “irrational pessimism” among tech investors afterward; leading them to avoid any investment-related with technology stocks or web-based businesses until more stability could be achieved again in these markets once more information regarding company viability became available following changes made after Sarbanes–Oxley Act was passed by U.S Congress in 2002 as part of reform efforts meant to restore trustworthiness back into investment banking industry after dot-com collapse had taken place earlier that decade.
The tech-heavy NASDAQ index experienced some of the worst losses during this time period — dropping 78% from its all-time high on March 10th to 1,114 on October 9th — wiping out trillions in investor wealth and leading many technology companies into bankruptcy or near bankruptcy as their share prices plummeted along with their revenue streams evaporating overnight due to lack consumer confidence caused by this collapse coupled with decreased liquidity in these markets due inflated prices prior too quickly corrected downwards now.
Other factors were also at play during this time including changes in Federal Reserve policy (tightening monetary conditions), increased volatility from algorithmic trading programs which intensified selling pressure, and corporate scandals such as Enron which contributed greatly to investor wariness resulting in a lack of confidence for further investments. This led many retail investors who had jumped onto the tech stock bandwagon hastily earlier around mid-1999 now faced tremendous losses as indices tanked leaving thousands bankrupt overnight unable ever recover any value still stored within their once-promising securities.