How The S&P 500 Performed During Major Market Crashes

(Click on image to enlarge)

How the S&P 500 Performed During Major Market Crashes

Like spectacular market peaks, market crashes have been a persistent feature of the S&P 500 throughout time.

Still, the forces underpinning each rise and fall are often less clear. Take the COVID-19 crash, for example. Despite lagging economic growth and historic unemployment levels, the S&P 500 bounced back 47% in just five months, in a stunning reversal.

Drawing data from Macrotrends, the above infographic compares six historic market crashes—examining the length of their recoveries and the contextual factors influencing their durations.

The Big Picture

How does the current COVID-19 crash of 2020 stack up against previous market crashes?

(Click on image to enlarge)

By far, the longest recovery of this list followed the devastation of Black Tuesday, while the shortest was Black Monday of 1987—where it took 19 months for the market to fully recover.

Let’s take a closer look at each market crash to navigate the economic climate at the time.

After the Fall

What were some factors that can help provide context into the crash?

1929: Black Tuesday / Great Crash

Following Black Tuesday in 1929, the U.S. stock market took 7,256 days—equal to about 25 years—to fully recover from peak to peak. In response to the market crisis, a coalition of banks bought blocks of shares, but with negligible effects. In turn, investors fled the market.

Meanwhile, the Federal Reserve Board rose the discount lending rate to 6%. As a result, borrowing costs climbed for consumers, businesses, and the central banks themselves. The tightening of rates led to unintended consequences, with the economy capitulating into the Great Depression. Of course, factors that contributed to its prolonged recovery have been debated, but these are just a few of the actions that had implications at the time.

1973: Nixon Shock / OPEC Oil Embargo

The Nixon Shock corresponded with a series of economic measures in response to high inflation. Soaring inflation devastated stocks, consuming real returns on capital. Around the same time, the oil embargo also occurred, with OPEC member countries halting oil exports to the U.S. and its allies, causing a severe spike in oil prices. It took seven years for the S&P 500 to return to its previous peak.

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