Biggest stock market crashes: How does the current dip compare?

2022 and 2023 have seen a bear market take hold as global stock markets dipped amid events like the Russian war in Ukraine, central banks increasing interest rates and the collapse of Silicon Valley Bank and Credit Suisse.

To put the current market dip into perspective, we are tracking the drop in the S&P 500 and comparing it with those of the biggest stock market crashes of the last 50 years.

Wall street crash (1929)

The Wall Street market crash of 1929 is largely regarded as the biggest market crash in US history and is one of the most famous. The stock market had been rising steadily throughout the 1920s with a period of speculation where millions of people invested their savings or borrowed money to buy stocks. However, this pushed prices to unsustainable levels, creating a bubble that eventually burst.

The Dow Jones began to fall in October 1929, and by mid-November, the value was nearly half the level that it was in September. The market continued to fall over the next few years and bottomed out in July 1932. The Wall Street crash was a catalyst for the Great Depression in the 1930s.

The S&P 500 began in 1957, so our comparison chart does not feature the Wall Street crash.

1973-1974 crash

The next big stock market crash came in 1973, when the market lost almost half its value in less than two years.

A number of factors led to the stock market downturn, including a property market bubble, loss of confidence in the US economy following Nixon’s resignation, the devaluation of the US dollar and the 1973 oil crisis.

The market crash was global but particularly affected the US and the UK, contributing to a period of recession in these countries between 1973-1975.

Black Monday (1987)

Black Monday occurred on Monday, 19 October 1987, and is considered to be the single worst day of trading since the Wall Street crash.

The exact causes of the crash are uncertain, but economists have suggested the causes of the stock market crash included an overvalued dollar, rising interest rates and a period of speculation. The combination of these factors meant valuations of shares climbed to excessive levels.

Dotcom bubble (2000-2002)

Coinciding with the rise of the internet in the late 20th century was the dot-com bubble and the subsequent market crash that followed it. Investors were excited about the opportunities the internet would provide and the value of internet-related stocks rose significantly in the 1990s.

However, when internet startups did not achieve their expected revenue at first, this sparked investor panic and a mass sell-off of these stocks between 2000 and 2002.

Financial crisis (2007-2009)

The worst market crash of the last 50 years was the financial crisis that lasted between 2007 and 2009. The lowest point came after 351 days of trading when the market had fallen by 55.5% from when the crash first started.

In the years leading up to the crisis, banks could offer consumer credit and mortgage rates at a lower prime rate and were lending to “subprime” or high-risk customers. This caused a housing bubble that eventually burst, leaving banks with trillions of dollars of worthless investments in subprime mortgages.

In the UK, the Bank of England had to bail out two major banks: Royal Bank of Scotland and Lloyds Bank. This was after the sector had become overexposed to risky high loan-to-value mortgages.

Coronavirus crash (2020)

When COVID-19 began to spread worldwide and countries implemented measures to stop it, the stock market began to decline. The threat of business shutdowns, travel restrictions and lockdown measures caused widespread panic among investors. Due to intervention by the Federal Reserve, the S&P 500 had returned to its pre-pandemic value by August 2020.

Is this a bad stock market crash?

The worst market crash of the last 50 years was the financial crisis between 2007 and 2009. The lowest point came after 351 days of trading when the market had fallen by 55.5% from when the crash first started. Compared to this, the current market dip is nowhere near as bad. However, it has only been going on for a few months.

Is now a good time to buy stocks?

This has seen everyone from inexperienced retail investors to grizzled city veterans re-evaluate their portfolios and wonder if this is a great buying opportunity or if there is more pain to come.

Despite the possibility of the market dropping further, half (48%) of British investors polled by Finder said they planned to buy the current dip. A further 4% of Brits who don’t invest plan to buy the current market dip as well.

According to the survey, 4 in 5 Brits don’t currently invest and won’t be tempted to start because of this dip, while 52% of investors are also not planning to pick up more stocks because of the drop in the market.

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Finder.com’s Investing Writer, Danny Butler, says instead of trying to time the market, retail investors should consider long-term investment strategies.

“Although it may seem sensible to invest during a market crash, there is no telling when a dip will end, and until markets reverse, there is a high risk of incurring losses.

“Spreading out investments over time, instead of investing all at once, is a great strategy to mitigate the risk of timing. This strategy is called “dollar-cost averaging”. In theory, this means that you aren’t putting all your eggs in one basket, and you are likely to end up investing at good times as well as bad times.

“As our chart shows, previous market crashes have fallen below the current dip. If the banking industry suffers further from high interest rate exposure, the S&P 500 could fall significantly more. On the other hand, it could bounce back quite quickly if current measures are enough to avoid a banking domino – there is just no way of accurately predicting it.”

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