From the Great Depression of 1929 to the crisis caused by the global pandemic of covid-19, we show you the biggest stock market declines in history.
"The flapping of a butterfly's wings can be felt on the other side of the world." This Chinese proverb, together with the research of the American mathematician and meteorologist Edward Lorenz, is the origin of the principle known as the "butterfly effect". This concept, linked to chaos theory, has globalization as one of its main explanations in the case of financial markets.
The United States has initiated most of the economic crises that we have experienced in the last two centuries. The falls in the New York Stock Exchange have been of such magnitude that they have spread around the world with serious effects for all national economies. From the Great Depression of 1929 to the global crisis of 2008, there have been numerous sharp stock market declines originating in the US markets. The last crisis has been more global from the beginning, caused by the global pandemic derived from covid-19.
War factors such as World War II or the Cuban missile crisis were also decisive in triggering times of serious financial problems that were projected for several years and that also affected the society of the time.
In other cases, financial bubbles such as the one caused by the so-called dot-com companies, caused significant declines in the valuation of their securities, which also dragged down the rest of the companies and gave rise to a major economic recession. And on some occasions, such as Black Monday in 1987, its origin is unknown for sure, although it was one of the worst days in the history of the New York Stock Exchange.
In most of the stock market crashes, investor panic played a fundamental role, with a significant rate of selling and the consequent reduction in prices. The propagation of these declines in the value of securities occurs at a dizzying pace and leads to the collapse of the markets.
Below we show you in this image gallery the worst stock market crashes in chronological order. When will the next big crisis occur?
The Great Depression of 1929
This is the first major global stock market crash, which spread rapidly throughout a world that did not yet know what globalization was. It occurred in October 1929, when the New York Stock Exchange chained several "black days". Panic broke out and people flocked to withdraw money from banks.
Fed adjustment of 1937
The United States Federal Reserve (Fed) decided in 1937 to tighten its rate policy after the Great Depression; measure that hampered economic growth. The S&P 500 index sank and lost 60% of its value in the following years, also affected by World War II.
Flash crash of 1962
Also called the 'Kennedy Slide' after the sharp drop in the stock market from December 1961 to June 1962 during John F. Kennedy's presidential term. The trigger was the Cuban missile crisis.
Tech crash of 1970
After several consecutive years of growth and reaching a high in November 1968, the S&P 500 declined 36% in the following 18 months. Unlike previous recessions, this time it was due to stagflation: a combination of recession and high inflation.
Black Monday 1987
It was one of the worst days in the history of the New York Stock Exchange, with a single-day drop of more than 20%, the largest loss in a session in the history of the Dow Jones. Every stock market on the planet crashed dramatically for no apparent reason.
The dot com bubble
The dizzying rise of companies with activities on the Internet attracted many investors who bet heavily on these companies. Significant miscalculations about their future valuation made the price of these firms unsustainable, and the balloon finally burst in 2001, giving rise to a new recession.
Motivated by subprime mortgages or junk mortgages, the financial earthquake was of such magnitude that even today it continues to affect many economies around the world. One of the results of this crisis in the banking system was represented by the bankruptcy of the investment banking giant, Lehman Brothers.
Covid-19 crisis
The coronavirus affected the movement of people with restrictions and lockdowns, leading to many job losses and business closures. On March 12, 2020, the S&P 500 lost 9.51%, while a few days later it fell another 11.98%.
