Top-12 Biggest Collapses On The Stock Market… – TheTradable

The stock market is a litmus test paper, whichreflects the state of the world economy. Wars and catastrophes, epidemics, andpolitical crises there are many unpredictable events that can suddenly turnthe bull market into a bear market. COVID-19 pandemic is the latest one: sinceFebruary 20th, it has caused the fall of the S&P 500 index byalmost 30%.

However, thats not the only event like that. Letstake a retrospective look at the biggest stock market collapses in history.

1.Cuban missile crisis

Collapse date: October 16, 1962

Recession Period: 12days

After the end of World War II, the USA and the USSRstarted the arms race (which was the part of the Cold War). Meanwhile, therevolutionary government of Fidel Castro came to power on Cuba in 1959 andstarted introducing socialistic reforms. The Soviet Union supported the reformsand offered its help to the Cuban people. The very fact of cooperation betweenCuba and the Soviet Union caused serious concern in the United States.

In 1961, the Americans created a military base inTurkey and deployed missiles with nuclear warheads in close proximity to theUSSR. Nikita Khrushchev understood the consequences of such a missile strike onthe USSR, so the Soviet authorities decided to deploy nuclear missiles in Cubain response. They transferred 40 nuclear missiles and the necessary equipmentto Cuba by October 14, 1962. That caused the escalation of the conflict.

The stock market was affected by the crisis: the S&P500 index fell by 7% but managed to recover pretty quickly. Some experts saythat this crisis never happened; to be precise, it did not affect the stockmarket. The index flattened, and it was not as dreadful as the 27% drop of theindex in June 1962.

2.Arab-Israeli war and the oil embargo

Collapse date:October 29, 1973

Recession Period: 27days

On October 6, 1973, an 18-day military conflict brokeout between the coalition of Arab countries and Israel, which was calledDoomsday. In the conditions of the Cold War, Syria, Egypt, Iraq, and Jordanwere supported by the armed forces of the USSR, while Israel and Europe gothelp from the United States.

On October 17, Arab countries announced that OPEC washalting oil supplies to the United States, Japan, Europe (Great Britain,France, and Holland). The market reacted instantly: the price of oil over thenext 12 months increased four times - from $ 3 to $ 12.

In North America and European countries, industrialproduction is reduced by 48% - strikes begin. The jump in prices for gasolineand diesel fuel, the refusal of citizens from cars, the reduction in the numberof flights by almost two times affected the state of the stock markets. The capitalization of the New York StockExchange decreased by 45% while the London Stock Exchange Index fell by 73%.

The peak fall in stock indices occurred on October 29,1973. The decline in the S&P 500 lasted 27 days and amounted to 17.1%. Thereturn of the UK stock market to the pre-crisis level occurred in 1987, whilethe United States managed to finally overcome the consequences of the crisisonly in 1993.

3.Iran hostage crisis

Collapse date:October 5, 1979

Recession Period: 24days

Prerequisites for the next stock market crash began totake shape at the beginning of 1979. In January, the Islamic Revolution tookplace in Iran. Power in the country was captured by radical Shiites led byAyatollah Khomeini. The new government has reduced oil production: now, thecountry began to provide only its own needs, although, before the change ofgovernment, it provided 5% of the global supply of oil.

Relations with the United States were strained: ontheir territory, under the pretext of treatment, the former shah had takenrefuge with leukemia. As a result, on November 4, 1979, a crowd of studentsseized the US Embassy in Tehran and took 66 people hostage demanding theextradition of the fugitive ruler to his homeland. Later, 14 people werereleased, and the rest were imprisoned for 444 days.

US President Jim Carters responsive measures werestrict. He blocked Iranian assets stored in US banks and introduced a ban onthe import of Iranian oil. Economic sanctions did not solve the hostageproblem, and the Eagle Claw military operation was a failure.

Soon after, the second oil shock started: negativeexpectations regarding oil supplies led to an increase in oil prices from 1214to $ 3645 per barrel. The stock market immediately responded to the crisis inthe national economy: the S&P 500 index fell 10.2% in 24 days. The first signsof the transition to the bull market appeared only in 51 days, but the economyrecovered successfully.

4.Black Monday

Collapse date:October 13, 1987

Since 1982, the US stock market has maintained abullish position. Growth began to slow by 1986. The inflation rate declined,and experts unanimously reiterated that a new economic "boom" wascoming. Exchange trading intensified: from January 1985 to October 1987, andthe Dow Jones index grew twofold.

An unprecedented collapse began on October 13, 1987:the New York Stock Exchange Index fell by 22.6%. The peak of the recessionoccurred on October 19. The causes of the collapse included:

The market was overestimated by experts, and thepsychology of investors played a cruel joke - the active growth of the DowJones index forced them to sell assets in droves. The exchange could not stand theheat, and the recession began.

The crisis spread to the Hong Kong stock exchanges(index drop - 45.8%), Canada (22.5%), Australia (41.8%), Great Britain (26.4%).

The reaction of the S&P 500 pronounced into adecrease of 28.5% in just five days. The return period from the bear marketto the bull was 398 days.

5.The first Gulf War on January 1, 1991

Collapse Date:January 1, 1991

The military conflict between Iraq and Kuwait is knownnot only for the unprecedented use of aviation but also for its influence onworld stock trading. In 1988-1990, stock markets were growing steadily: indicesincreased over two years by an average of 50%. Oil prices were stable and keptat $20 per barrel.

In July 1990, Iraq began to draw military units to theKuwait border. The Dow Jones and S&P 500 indices sag by 5-10%, and by theend of the year, the collapse rate reached 20%. The threat of war is becoming apparent the growth of oil prices is predictable.

The peak of the stock market fall occurred on January1, 1990: the S&P 500 then lost 5.7%. The recession lasted six days. Thegradual return of trading to its former positions began with the launch ofOperation Desert Storm on January 17. The conflict did not affect long-termstock market trends.

6.Terrorist attacks of September 11, 2001

Collapse date:September 11, 2001

On September 11, a group of 19 specially trainedterrorists from the al-Qaeda organization captured four passenger airliners inorder to carry out the most significant terrorist attack in the history of theplanet. During the operation, both buildings of the World Trade Center weredestroyed. Many office buildings in Manhattan were affected.

Due to a malfunction of telecommunication equipmentfrom September 11 to September 17, 2001, the following events happened:

The value of shares on the New York Stock Exchangelost $ 1.2 trillion. Under these conditions, the S&P 500 decreased by 11.6%from September 11 to September 17. The bull market was returned in 8 days.

7.Atypical pneumonia (SARS) 2003

Collapse Date:January 14, 2003

Recession Period: 39days

During the COVID-19 pandemic, people often recall theSARS epidemic (Severe Acute Respiratory Syndrome, SARS, SARS) that broke out in2002 and, in 2003, had a major impact on stock markets.

SARS virus was first detected in November 2002 in theChinese province of Guangdong. The epidemic has spread to 30 countries. Of the8,400 cases, 813 died.

The economic consequences of the epidemic were thefollowing:

The crisis, caused by a 5.8% reduction in worldproduction and a significant influence of China on the global economy, led to aslow collapse of US stock trading at the end of 2002. By mid-January, the DowJones Index fell 22.1%.

The S&P 500 recession lasted more than a month and,at its peak, reached 14.1%. The fall lasted 39 days, but the market managed toregain its previous positions only in March 2003.

8.Lehman Brothers Bankruptcy

Crash Date:September 15, 2008

Recession Period: ~180days

On September 5, 2008, Lehman Brothers, the fourth-largestinvestment bank in the United States, filed for bankruptcy. The collapse of oneof America's oldest financial institutions with 160 years of history, withoutexaggeration, produced the effect of an exploding bomb. In one day, the DowJones stock index crashed by 500 points - such a New York stock exchange hasnot experienced since the terrorist attacks of September 11, 2001. Lossescontinued until March 5, 2009, when the Dow closed at 6,594.44. That was a 53%drop from its peak of 14,164.53 on October 10, 2007. The S&P 500 closed at1,192.69, its lowest close in nearly three years. Within a few days, thefinancial crisis affected the markets of the United States, and soon after -the whole world.

On September 16, 2008, the American insurance companyAIG was on the verge of bankruptcy due to the collapse of Lehman Brothers, andthe US government spent $ 180 billion on the nationalization. On September 18,Lloyds (Britain) was forced to agree to a merge with the HBOS. On October 12,the new bank The Lloyds Group and at the same time Royal Bank of Scotland werenationalized. In October 2008, the US Treasury Department allocated $ 00billion to support the banking system and the automotive industry.

In spring 2009, the new administration of Barack Obamaallocated $787 billion to stimulate the economy, which went into a sharp peakafter the bankruptcy of Lehman Brothers. Thanks to the active intervention ofthe monetary authorities of the United States, Europe, and Japan, theconsequences of the bankruptcy of Lehman Brothers were able to compensate.

9.The global financial crisis or the Great Recession

Crash Date:October 10, 2008

Recession Period: 356days

The largest drop in stock markets in the history ofexchange trading is the Great Recession 2007-2009. The crisis pronounced in thefollowing events:

Among the causes of the crisis are financialderivatives - derivative securities, yield, which depends on the magnitude ofthe risk. Up to 40% of investments in the financial and construction sectorscame from them, which created an artificial bubble.

The financial crisis in the United States contaminatedother countries: the collapse affected the housing, financial, and commoditymarkets. In October 2008, the MSCI World index (developed economies) fell by32.2%, and the MSCI Emerging Markets index (developing economies) fell by40.5%.

On October 10, 2008, the collapse of the Dow JonesIndex in just a day was 6.6%. During the year of the crisis, the S&P 500decreased by 56.8%. For almost three years, the US stock market has beenoperating in a bearish mode.

10.Intervention in Libya in 2011

Crash Date:February 18, 2011

Recession Period: 18days

In 2011, NATO forces invaded Libyan territory underthe pretext of protecting civilians in a civil war. The war in theoil-producing region of the Middle East repeated the scenario of two wars inthe Persian Gulf. Oil prices rose from $ 99.7 to $ 120.9 per barrel, which wasdue to the complete paralysis of Libyan oil refineries and a reduction in blackgold production by eight times. US government spending on a military operationwas estimated at $600-800 million, and US corporation losses were more than $50 billion.

The fall in the markets was short-term and ended inMarch 2011 - even before the bombing of the country and the assassination ofGaddafi. In general terms, the recession of the S&P 500 index amounted to6.4% and lasted 18 days. A month later, the market returned to its previouspositions.

11.Voting for UK withdrawal from EU (Brexit)

Collapse Date: June8, 2016

Recession Period: 14days

In June 2016, 52% of the UK population expressed adesire to leave the European Union. Later, an agreement was signed that byDecember 31, 2020, Britain would withdraw its troops from the EU and cease toparticipate in its political processes. However, it will retain its place inthe Customs Union and within the framework of a single market.

The transition process of the country's exit in June2016 to the economic consequences manifested into several sequences. Over themonth, the pound sterling fell by 10% against the US dollar and by 7% againstthe Euro. In just one day (June 5), the London Stock Exchange Index (FTSE 100)fell 3%.

A few days later, the collapse reached the exchangetrading in the USA: the bear tendency started ruling the market, which resultedin a reduction of the S&P 500 by 5.6%. Nine days after, the exchange beganto rise.

12.COVID-19 the new danger

Collapse Date:February 19, 2020

Recession Period: 19days

The current situation with coronavirus pandemiccouldnt leave stock markets unaffected. The reduction of the S&P 500 indexby 29.5% took just 19 days. At the moment, the success of exchange trading isvolatile: on March 13, the indicator increased by 12% but lost 2-4% per dayafterward.

The reasons for the next financial crisis caused bythe COVID-19 pandemic are:

The global stock market crash started on February 19,2020. The Dow Jones, S&P 500 and NASDAQ-100 indices lose 2-3% over the next30 days for each daily session.

On BlackMonday, March 9th, all three indicators (Dow Jones, S&P 500 and NASDAQ-100)declined in just a day by more than 7%: this recession was recognized as themost disastrous since the 2007 crisis.

Didthe market hit the new lows?

The disastrous effects of the pandemic on the stockmarket are hard to overestimate. Heres what happened:

The dynamics of the VIX index showed that this timethe market participants were even more scared than in 2008. In mid-March, theVIX soared to its peak in 2008, and its quarterly growth by 289% was the mostsignificant since 1990 for which data are available.

Given the global adverse socio-economic impact ofCOVID-19, it is too early to talk about the revival of the bull market trends.For some economies, it will take months or even years to recover.

The current state of the stock market causes panicamong investors. Trading expert Warren Buffett recommends players to focus onthe long term profits: volatility is temporary, the bull trend will berestored, and patient investors will be rewarded. The above-mentioned storiesof crises prove that. For some, the fall of stock quotes for someone means ruinand collapse, while for others, it provides the opportunity to buy shares oflarge, profitable, and stable companies cheaply.

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Top-12 Biggest Collapses On The Stock Market... - TheTradable