History of Stock market crash in Timeline

A stock market crash is a rapid and severe decline in stock prices across a large portion of the market. This sudden drop leads to a substantial loss of paper wealth for investors. Panic selling, driven by fear and uncertainty, is a major catalyst of crashes, often amplified by underlying economic problems. Speculative bubbles and unsustainable economic growth frequently precede market crashes.

1907: The Panic of 1907

The Panic of 1907 started with the manipulation of copper stocks leading to a near 50% drop in stock prices. The Knickerbocker Trust Company's failure and subsequent closure of investment trusts and banks fueled the panic. In 1907, J.P. Morgan intervened to prevent further bank runs.

1908: The Panic of 1907 Continues

The panic that started in 1907 continued into 1908, further impacting the stock market and the economy.

1913: Establishment of the Federal Reserve

As a response to the financial instability caused by the panic of 1907-1908, the Federal Reserve System was established in 1913 to act as a central bank and provide stability to the financial system.

August 24, 1921: Post-War Market Peak

On August 24, 1921, the Dow Jones Industrial Average (DJIA) stood at 63.9, marking a period of economic optimism following World War I.

September 3, 1929: Peak Before the Crash

By September 3, 1929, the DJIA had soared to 381.2, a more than sixfold increase from its August 24, 1921, level, indicating a period of rapid growth in the stock market.

November 11, 1929: The Aftermath of Black Tuesday

By the end of the weekend of November 11, 1929, the Dow Jones Industrial Average (DJIA) had fallen to 228, a 40% decline from its September high, marking the aftermath of the devastating Black Tuesday crash.

July 1932: The End of the Crash

The DJIA lost 89% of its value from its peak in September 1929 before finally bottoming out in July 1932, marking the end of the Wall Street Crash of 1929 and the beginning of the Great Depression.

1963: Mandelbrot Proposes Lévy Flight Model

In 1963, Mandelbrot proposed that stock price changes might be better explained by a Lévy flight, a random walk pattern occasionally interrupted by large, unpredictable jumps.

1963: Benoit Mandelbrot Challenges Random Walk Hypothesis

In 1963, mathematician Benoit Mandelbrot challenged the conventional assumption that stock markets follow a random log-normal distribution. He argued that large price movements (crashes) occur more frequently than this model predicts, suggesting a different underlying dynamic.

August 1982: Start of a Bull Run

In August 1982, the Dow Jones Industrial Average (DJIA) started at a low point of 776, indicating a period of economic downturn.

August 1987: Peak Before the Crash of 1987

By August 1987, the DJIA had risen to 2722, showing a significant increase from its August 1982 level and signaling a period of strong economic optimism.

October 1987: Global Impact of Black Monday

In October 1987, following Black Monday, all major world markets experienced substantial crashes or declines, signifying the global impact of the event. Austria was least affected with a fall of 11.4%, while Hong Kong was hit hardest with a 45.8% drop.

October 1987: George Soros's Observation on Market Reflexivity

In late October 1987, George Soros, a prominent investor, commented on the nature of market movements, highlighting the concept of reflexivity, which suggests that market participants' actions can influence market prices, leading to non-linear movements.

October 19, 1987: Black Monday

On October 19, 1987, also known as Black Monday, the DJIA experienced a record-breaking plunge of 508 points, a 22.6% drop in a single day, marking the beginning of a global stock market crash.

1987: Black Monday

Black Monday, which occurred on October 19, 1987, was the day the stock market crashed. It was the largest one-day percentage drop in stock market history.

1987: The Year of the Crash and Rebound

Despite the crash in October 1987, the DJIA still managed to gain 0.6% during the calendar year 1987, showcasing a rapid recovery following the Black Monday decline.

1987: Trading Curbs Introduced as Mitigation Strategy

Following the Black Monday crash of 1987, trading curbs, also known as "circuit breakers," were introduced as a risk management measure. These curbs aim to temporarily halt trading in response to significant market drops, preventing extreme volatility and potential manipulation.

1987: Introduction of Circuit Breakers

In response to the 1987 crash, the New York Stock Exchange (NYSE) introduced circuit breakers. These trading curbs are triggered by significant market declines and are designed to prevent panic selling and stabilize the market.

1987: Factors Contributing to the 1987 Crash

While the exact causes of the 1987 Crash remain inconclusive, several factors are believed to have played a role, including high market valuations, herd behavior, program trading, portfolio insurance, derivatives, a growing U.S. merchandise trade deficit, and a weakening U.S. dollar.

September 1989: Market Recovery After the Crash

By September 1989, the Dow Jones Industrial Average (DJIA) had recovered all the value lost during the 1987 crash, demonstrating the market's resilience.

1995: Mantegna and Stanley Analyze S&P 500 Data

In 1995, Rosario Mantegna and Gene Stanley analyzed a large dataset of S&P 500 Index records, examining returns over a five-year period. This analysis contributed to ongoing research on market dynamics and the potential for models to replicate crash-like events.

October 9, 2007: DJIA Reaches Pre-Crisis Peak

On October 9, 2007, the DJIA reached a peak of 14,164, marking a high point before the subsequent market downturn.

2007: Global Financial Crisis

The global financial crisis of 2007-2008 was a severe worldwide economic downturn. It was the most serious financial crisis since the Great Depression.

September 15, 2008: The Collapse of Lehman Brothers and Merrill Lynch

On September 15, 2008, the bankruptcy of Lehman Brothers and the collapse of Merrill Lynch, triggered by exposure to subprime loans and credit default swaps, ignited a global financial crisis.

October 11, 2008: IMF Warns of Systemic Meltdown

On October 11, 2008, the International Monetary Fund (IMF) issued a stark warning that the world financial system was on the verge of a systemic meltdown due to the escalating financial crisis.

October 24, 2008: Global Stock Market Crash

On October 24, 2008, global stock exchanges experienced significant declines, with most indices dropping around 10%. The US DJIA fell by 3.6%, while other markets were hit harder. The US dollar and Japanese yen strengthened as investors sought safe havens. This event was considered a major financial crisis, with the deputy governor of the Bank of England calling it a "once in a lifetime crisis".

2008: Record Weekly Decline for the DJIA

During the week of October 6–10, 2008, the Dow Jones Industrial Average (DJIA) experienced its worst weekly decline ever, plummeting over 1,874 points (18%). This period also witnessed record-breaking trading volumes on the New York Stock Exchange (NYSE).

2008: The Crash of 2008

The 2008 financial crisis, often referred to as the "Crash of 2008," was compared to Black Monday (1987) due to its severity and global impact. The Dow Jones Industrial Average (DJIA) experienced a 21% drop in a single week.

2008: Global Financial Crisis

The global financial crisis of 2007-2008 was a severe worldwide economic downturn. It was the most serious financial crisis since the Great Depression.

March 6, 2009: DJIA Reaches Lowest Point of the Crisis

On March 6, 2009, the DJIA hit its lowest point since the peak in October 2007, plummeting 54% to 6,469. This marked a significant point in the financial crisis, after which the market began to recover.

2011: Research Links Imitation to Market Crashes

In 2011, researchers at the New England Complex Systems Institute used complex systems analysis to show a correlation between increased investor imitation and market crashes. This suggests that panics leading to crashes might stem from herding behavior, where investors mimic each other's actions, amplifying market movements.

February 2020: Pre-Pandemic Market Levels

February 2020 represents a period before the widespread market impact of the COVID-19 pandemic.

March 9, 2020: Oil Price War and Market Decline

On March 9, 2020, following the start of the Russia-Saudi Arabia oil price war, stock markets worldwide experienced sharp declines. The FTSE and other European indices fell nearly 8%, Asian markets dropped significantly, and the S&P 500 plunged 7.60%. The Italian FTSE MIB experienced a substantial drop of 11.17%.

March 12, 2020: US Travel Ban and Market Plunge

On March 12, 2020, global stock markets plummeted after President Trump announced a travel ban from Europe. The DJIA experienced its most significant daily decline since Black Monday (1987), falling 9.99%, despite the Federal Reserve's intervention. The S&P 500, Nasdaq, and major European indices all dropped over 9.5%.

March 16, 2020: Market Collapse and Recession Fears

On March 16, 2020, the realization that a recession was imminent caused a stock market collapse. The DJIA experienced its largest point drop since Black Monday (1987), plummeting by 12.93%. The Nasdaq and S&P 500 also suffered substantial declines, dropping by 12.32% and 11.98% respectively.

May 2020: Brief Market Recovery

By the end of May 2020, stock market indices had briefly rebounded to levels seen in late February 2020.

June 2020: Nasdaq Surpasses Pre-Crash High

In June 2020, the Nasdaq Composite Index surpassed its pre-crash high, indicating a recovery from the market downturn.

2020: COVID-19 Pandemic Impacts Global Markets

In 2020, the COVID-19 pandemic caused a global stock market decline. Major indices, including the FTSE 100, DJIA, and S&P 500, experienced substantial drops.