What Is a Stock Market Crash?

Nov 28, 2023 By Triston Martin

A dramatic point and percentage decline occurring within a day or two of trading are a crash. Its abruptness of it is a defining characteristic. A correction in the stock market is characterized by a more steady decrease of at least 10% below the 52-week high. A bear market is considered to have occurred when prices have fallen by 20%.

History of Downturns

How does the collapse of 2020 compare to previous drops, dips, and crashes that have occurred in the past? Since 1929, the following is a survey of the most significant economic downturns.

1929 Crash

The collapse of stock market in 1929 was the precipitating event for the Great Depression. The decline in share prices occurred over four days. It all started on that Thursday, October 24, 1929, which is now known as Black Thursday. Stock prices decreased by 11%. After then, they improved due to the sale of 12.9 million shares of stock. This was three times the typical quantity. It seemed like business had returned to usual on Friday.

On Black Monday, however, there was an additional 13% decline in the market. This transpired despite the efforts made by the bankers to put an end to the panic. The stock market dropped another 11% the next day, known as Black Tuesday. The public's lack of faith in Wall Street contributed to the onset of the Great Depression. The Dow Jones Industrial Average did not return to its level before the catastrophe until November 23, 1954.

1987 Crash

The financial crisis of 1987, known as Black Monday, began on October 9, 1987. The Dow Jones Industrial Average saw the greatest one-day percentage loss in the stock market's history, which was 22.6%. It took the market two years to recover to levels seen before the catastrophe. The decrease came after a rise of 43 percent earlier in that year.

There are three causes for this. Traders were initially concerned about potential anti-takeover legislation making its way through Congress. Second, when the Treasury secretary made the possibility public that he might allow the value of the dollar to decline, foreign investors began selling. Third, quantitative trading systems contributed to the deterioration of the situation. The collapse did not result in a recession because of the aggressive monetary policy implemented by the Federal Reserve.

Dot-Com Crash

  • Beginning in March of that year (2000), the NASDAQ saw the meltdown known as the dot-com bubble. The technological
  • On March 10, 2000, the index achieved its highest point of 5,048.62. The market dropped 7.6%, or 349.15 points, on April 3. On April 12, it dropped 7.1%, then on April 14, it dropped 9.7%, and on April 15, it dropped 7.2%.
  • 18. Additionally, it had big drops on May 30 (7.9%), October 13 (7.9%), and November 1 (7.9%).
  • October 19 (7.8%). On December 5, the market saw its worst drop of the year when it plummeted.
  • 10.5%. As of December 20, it has fallen 7.1%. The NASDAQ finished the year at 2,470.52, representing a loss in value of 51.1% from its all-time high.

Investors who contributed to the creation of a bubble in high-tech stock prices were to blame for the dot-com collapse. They were under the impression that all technology businesses were certain ways to gain money. They were unaware that the Y2K panic was the source of the technology industry's business riches. Businesses invested in brand-new computer systems to guarantee that their software would comprehend the distinction between the years 2000 and 1900. In those days, just two date fields were necessary as opposed to the current need of four date fields to discriminate across centuries properly.

Following September 11, 2001, the markets were shut down for four consecutive days. The Dow Jones Industrial Average dropped 685 points, or 7% when trading resumed on September 17, 2001. In March of 2001, a recession was already well underway in the economy. The Dow remained on a downward trend until 2002 because of war rumors.

2008 Crash

The 777.68-point loss in the Dow Jones Industrial Average on September 29, 2008, marked the beginning of the market crisis that occurred in 2008. It was the period when the New York Stock Exchange saw the greatest decrease in point value in its entire history. It decreased from 11,143.13 to 10,365.45, a 7% fall. When the Senate voted against the rescue measure, investors immediately began to freak out. If the government had not stepped in, many more financial institutions would have followed Lehman Brothers into bankruptcy. Between its all-time high in 2007 and its all-time low in March 2008, the Dow lost more than fifty percent of its value.

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