Glossary · Stocks and markets
Stock market crash
A stock market crash is a sudden, steep fall in share prices across the market, often 10% or more in a day or a few days, driven by panic selling.
Also called: market crash, stock crash, crash, Black Monday
S&P 500, monthly averages, Sep 1929 to Jun 1932. Back to the old record: Sep 1954.
Nov 1929: change in the S&P 500’s monthly average. In 2008: −20.4% (Oct 2008).
In plain words
A crash is a stampede. One morning prices start falling fast, sellers rush for the exit all at once, and buyers step back. In a day or a few days, a market can lose what it took months or years to gain. That is a stock market crash.
There is no official threshold, but the famous ones are unmistakable. On October 19, 1987, “Black Monday”, the S&P 500 fell 20.5% in a single day. In October 1929 the Dow lost nearly a quarter of its value in two days, the start of a fall that by 1932 had cut US stock prices by more than four-fifths.
A crash is about speed; a bear market is about depth and time. Some crashes are short shocks inside a rising market (1987); others open long bear markets (1929, 2008).
Example
How a crash feeds on itself
- Bad news hits a market that has risen a lot. Prices drop 5% in the morning.
- Investors who borrowed to buy get margin calls and must sell, whatever the price. Automatic stop-loss orders sell too.
- The selling pushes prices down further, which triggers more forced selling. Buyers wait, fearing worse.
- Since the 1987 crash, US exchanges have used circuit breakers: as of 2026, trading in all stocks stops for 15 minutes when the S&P 500 falls 7% or 13% in a day (before 3:25 pm), and for the rest of the day at 20%.
Crashes are as much about forced selling and fear as about the news that started them.
One level deeper
The famous ones: 1929 (the start of the Great Depression), 1987 (Black Monday, blamed partly on computerized “portfolio insurance” selling), 2000–02 (the dot-com bust, slower but brutal), 2008 (the financial crisis) and March 2020 (the pandemic, the fastest fall of 30% on record).
In the monthly data since 1871, the deepest fall from a record was 1929–32: −85%, from Sep 1929 to Jun 1932. Prices did not regain that record until Sep 1954, 25 years after the peak, not counting dividends.
Monthly averages soften crashes. The worst one-month change of the S&P 500’s average price was −26.5%, in Nov 1929, while the worst single day, in 1987, was −20.5%.
How far below its record the S&P 500 was, 1871 to today
Each month, the distance of the S&P 500’s average price from its highest level so far; zero means a new record. Crashes show as cliffs and bear markets as deep valleys. Climbing out of the 1929–32 crash took 25 years.
The numbers behind the chart
| Date | Below the record |
|---|---|
| Jan 1871 | 0% |
| Dec 1880 | 0% |
| Dec 1890 | −30% |
| Dec 1900 | 0% |
| Dec 1910 | −12% |
| Dec 1920 | −34% |
| Dec 1930 | −50% |
| Dec 1940 | −66% |
| Dec 1950 | −37% |
| Dec 1960 | −5% |
| Dec 1970 | −15% |
| Dec 1980 | −2% |
| Dec 1990 | −9% |
| Dec 2000 | −10% |
| Dec 2010 | −19% |
| Dec 2020 | 0% |
| Dec 2022 | −16% |
| Dec 2023 | 0% |
| Dec 2024 | 0% |
| Dec 2025 | 0% |
| Oct 2026 | 0% |
Why it matters
Crashes can wipe out years of gains in days and shake the whole economy, through lost wealth and frozen lending.
They lead to new rules: the SEC itself after 1929, circuit breakers after 1987, bank reforms after 2008.
The US market has recovered from every crash so far, but sometimes only after many years, as after 1929.
A common mistake
Myth: Crashes come out of nowhere.
In fact: The day is a surprise; the conditions often are not. Many big crashes followed long rises, high valuations and heavy borrowing. What nobody can do reliably is predict when the fall will start.
Questions people ask
What was the biggest stock market crash?
In one day: October 19, 1987, when the S&P 500 fell 20.5% and the Dow 22.6%. In total: 1929–32, when US stock prices fell 85% on monthly averages and did not regain their peak until Sep 1954.
What causes a stock market crash?
Usually a mix: prices that ran far ahead of profits, lots of borrowed money, and a trigger (bad news, a bank failure, a pandemic) that turns optimism into a rush for the exit. Forced selling then speeds it up.
How long does the stock market take to recover from a crash?
From months to decades. After 1987 the S&P 500 regained its peak in under two years; after 1929, prices took 25 years. Reinvested dividends shorten the wait.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- This page explains a term. It is not investment advice.