Stock Market Crash History: 1929, 2008, 2020 & What to Do Next

Will the Stock Market Crash Soon?

Last updated: February 2026 | First published: February 2018

It’s a question many people quietly wonder about—especially during times of uncertainty. You’re not alone if you’ve ever felt nervous watching the news, checking your portfolio, or wondering if now is the time to act.

I’ll show you why people want to know the next stock market crash prediction, and why you don’t have to be scared.

I don’t make predictions based on the news cycle—I look at patterns, history, and mindset. Whether it’s 2025 or 2035, these principles won’t change. This post is not for Wall Street pros, but people who want to protect their future, stay grounded, and make good decisions when things get shaky.

---

Stock Market Crash: Key Facts

• 1929 crash: Lost 89% of value, took 23 years to recover
• 2008 recession: 50% decline, recovered in 5 years
• 2020 COVID crash: 31% drop, recovered in just 3 weeks
• 75% of years show growth vs 25% decline (9 decades of data)
• 20+ year holding periods: 100% positive returns historically
• Key insight: Time IN the market beats timing the market

Data Source: Historical S&P 500 data

Stock Market Crash: Overview

The stock market has crashed every so often for a hundred years.

But our memories are short-lived.

No matter how many times the stock market crashes, the next one feels just as unexpected and just as painful.

How should you protect yourself from the next market crash? First, you must understand why crashes happen.

What is a Stock Market Crash?

A stock market crash is a social phenomenon. It is a human-created spiral triggered by economic events and crowd psychology.

Stock market crashes happen when these 4 factors occur together:

• Stock market prices have been increasing for a long time.
• Everyone is overly optimistic about the future.
• The P/E ratio of the market today is higher than the historical averages.
• People borrow money to buy things at a high debt-to-equity ratio.

Disasters and government regulations also contribute to stock market crashes. But crashes mostly happen because people spend too much money they don’t have to buy things above their right values.

Let’s look at six significant stock market crashes in history and review why the market crashed in 1929, 1987, 2000, 2008, 2020, and 2022 and what lessons can we learn to help us get through any future crash.

Stock Market Crash of 1929

The stock market crash of 1929 is the worst stock market crash in human history. It destroyed a generation of people and changed their relationships to their family, to each other, and to the government.

But for the six years leading up to 1929, it was euphoria.

The stock market has increased by 345% for six years straight, and people were borrowing money left and right to buy more stocks.

The good times felt like it’s never going to end.

But all good things end. On Black Tuesday of 1929, the stock market crashed for the first time by 10%.

And for the next three years, the market kept getting worse.

At the worst point in 1932, the stock market lost 89% of its value from the peak.

It would take 23 more years, a whole generation, for the stock market to climb back up!

Imagine losing 89% of your money and waiting 23 years to get it back! Would you have the patience to hold for that long?

The Lost Generation

1929 is a picture of unimaginable loss, so bad that we call that period in American history the Great Depression.

For a decade, half of the people in the U.S. lost their jobs and the other half barely worked part-time.

People survived on beans and potatoes. Men fought over barrels of garbage as food scraps for their families.

The Great Depression brought proud men and women to their knees and led millions of children to grow up hungry and anxious. Many never got over the trauma for the rest of their lives.

The first few minutes of the video below talks about the Great Depression’s economic hardship and its psychological impact on the people.

Can the 1929 Crash Happen Today?

Much of our anxiety about the stock market crash comes from our fear of what happened to our grandparents.

Can the Great Depression happen to us? Can a market crash today wipe away all of my investments, forever?

No. I do not believe so.

Another stock market crash will happen. But another Great Depression will likely never happen again. Here is why:

Bad Government Decisions Leading to a Depression

While the 1929 stock market crash destroyed the stock market, the Depression is made worse by other factors unrelated to stocks.

When the stock market crashed, people panicked and withdrew their bank money, which caused the banks to go bankrupt because there was no Federal Deposit Insurance.

As such, people not only lost their stock investments, they also lost their savings.

And then things got worse:

At the time, the United States was on the gold standard and promised to honor each dollar with a value in gold. So everybody put the little money they have left in gold.

This made the gold prices soar, and the Fed feared that it would soon run out of gold. So the Fed decided to increase interest rates in the hope of improving the dollar’s value against the Gold.

Huge mistake.

Super high interest rates stopped all businesses from accessing loans, creating massive layoffs, widespread bankruptcies, and a complete collapse of the U.S. economy.

The stock market crash of 1929 alone is bad, but not deathly. The bank runs and interest rate spikes created the Great Depression.

Government’s Effort to Learn from Its Mistakes

Today, we’ve learned our lesson, and written laws to ensure we don’t make the same mistakes again

Nearly every bank in the United States is now protected by the FDIC so banks won’t run out of money. And the dollar is no longer pegged to the gold.

The Fed also knows to never spike interest rates when the economy is on the rough. Quite the contrary, the Fed now actively lowers interest rates during recessions in order to promote business lending and growth!

Stock Market Crash of 1987

On Monday, October 19, 1987, now known as Black Monday, the Dow Jones Industrial Average fell 23% in one day.

This crash happened on an ordinary day without any significant news.

At the time, this was the largest single-day percentage decline.

When the crash first happened, prominent economists predicted we are on the cusp of another Great Depression. And people panicked.

But the smart guys were utterly wrong. The economy grew steadily after the crash, and barely a year later by early 1989, the market recovered.

People who held onto their money recovered in no time. Those who kept investing saw tremendous gains.

And the panicked ones who sold after the crash lost big.

The Crash That Isn’t

We now realize that the 1987 crash was not due to over-valuation but to a glitch in computerized trading.

Somebody somewhere made a mistake on a stock price, and this triggered all the computers to automatically “dump” stocks. We caught the error eventually, but the damage is done.

Regulators now have “trading curbs” or “circuit breakers” to halt the stock market during substantial price declines so such events will never happen again.

The market crash of 1987 is very different from that of 1929. It did not destroy a generation. On the contrary, 1987 is an unprecedented opportunity for people to get rich quickly.

Stock Market Crash of 2000 (DotCom)

Now let’s talk about the first tech boom.

The stock market crash of 2000 is all about irrational exuberance. It is a stock market crash entirely created by the mania of this new technology called the internet.

This is why we call it the Dot.com bubble. And there is a lot of similarities between the Dot.com bubble and what we have now.

The stock market crash of 2000 is so important that it deserves its own special guide. And so I wrote a separate post dedicated to the DotCom crash.

And not long after the DotCom crash, only eight years later, another crash happened.

We are talking about the 2008 Mortgage Crisis: the crash that traumatized the millennials generation.

Stock Market Crash of 2008

Less than 18 months after the stock market hit its all-time high in 2007, it dropped by 50%.

Thus begin the recession of 2008.

In the years leading up to 2007, the real estate market in the United States experienced unprecedented growth.

Housing prices across the U.S. doubled in a few years.

People borrowed money to buy houses so they can “flip and sell” in a few months.

If this sounds familiar, well, it’s happened before. But this time, it’s not the stocks; we have a real estate bubble.

Eventually, home prices became so high that buyers stopped buying. And so the home prices fell, and fell, and fell…

People got stuck with a mortgage they can’t afford and a house worth half as much, forcing them to declare bankruptcies.

But then things got worse.

Real estate bankruptcies did NOT just end in the real estate market…

Credit Swaps Turning Real Estate Crash into Stock Market Crash

When enough people defaulted on their mortgage loans, the banks who lend these people money also defaulted.

And that’s where unexpected things started happening.

These banks not only sold mortgage loans to each other but also sold them to insurance companies, teacher’s pension funds, car companies, and other investors in the form of complex derivatives and credit default swaps.

So all of a sudden, it wasn’t just the banks who had bad mortgage loans, it was every Fortune 500 company and people’s 401Ks.

Credit swaps and mortgage derivatives were financial instruments designed to spread the risk around. But it ended up giving the risk to everyone and hurting everyone.

And when famous investment banks Bear Stearns and Lehman Brothers collapsed, everybody followed.

The U.S. Treasury Department poured billions of dollars to save companies, from banks like Fannie Mae, Freddie Mac, to insurance giant AIG and auto companies General Motors and Chrysler.

Hundreds of thousands of people lost their jobs. Banks stopped lending and investments froze.

Even though interest rates went to 0%, nobody was borrowing and growth simply stopped.

2008 Recession Recovery

The stock market struggled for another five years before hitting its strides again in 2012.

For those that kept their money in the stock market, they would’ve recovered all of their losses in five years. That’s a lot of waiting (and requires balls of steel in light of so many fears), but not as bad as the 23 years it took for the Great Depression to recover all of the loss.

Steady Recovery from 2008

By 2012, the United States stock market is on the upswing. Between 2010 to 2017, the stock market price increased by 215%, which is an average of 12% growth rate every year for over eight years.

Toward the end of 2017, the United States government passed a sweeping tax cut that among many changes, cut the corporate profit tax from 35% to 21%.

The new law sent the stock to an all-time high, again.

Many smart people thought the 2008 recovery maxed out by 2016.

Little did they know that 2016 is only the start of another bull run!

But if there is a lesson we can learn from the past, it is that when something feels euphoric, it’s probably time to get nervous again.

Looking at historical data, we see that a recession tends to happen every seven to ten years. By this logic, a recession is due in 2020.

Which is why in the original blog, I predicted that a stock market crash will occur in 2020.

COVID-19 Global Pandemic

And the stock market did crash in 2020. But for a totally different reason!

I had assumed that the tech bubble would burst in 2020, not that a bat virus would sweep the world to kill people.

Self-Induced Shutdown in 2020

Most stock market crashes are not self-induced. Businesses don’t stop producing voluntarily; they stop because people no longer want to buy from them.

But in the case of a global pandemic, we were forced to stop our lives. This goes to show what I’ve said before: every stock market crash is different.

When Wuhan went into lockdown in late January, the rest of the world was watching China carefully.

Most watched as if it would never happen to them.

But then things hit all of us at once.

Italy started to go on alert. Then it was the rest of Europe. Around mid March, the United States went into lockdown.

I remember going home from work on my last day feeling apprehensive.

My neighborhood was dead silent during those first few weeks of the pandemic.

No noises from cars or people. Only the sound of birds chirping across the bright skies of a silent spring.

Resurrection from Death

As the world stopped, the market reacted very badly because we had no idea what is going to happen.

Will this virus wipe all of us out? Will this last days, months, or years?

The stocks that suffered the most were stocks in Travel, but the entire stock market went into a full decline.

In two weeks, the Fortune 500 stocks went down 31%.

And yet, something remarkable also happened.

We started to buy things online at an unprecedented rate. Some of us found that we are able to work fully remote.

We got married over zoom. And soon enough, we had vaccines.

The world is never going to be the same again, but businesses started producing.

The stock market, reacting to hope and unprecedentedly low interest rates, saw one of the fastest market crash recoveries in the history of all recessions.

The market went down by 31% in 2 weeks, then fully recovered in 3 weeks. It went so fast that nobody was able to time the market and buy low and sell high.

Meme Stocks & Crypto Euphoria of 2021

2021 is the year for the record books. Stocks and crypto currencies went crazy, much like what happened in 1927 and 2006. Luck is confused as skills. People were euphoric.

Everyone is a smart trader because you would make money investing in just about anything. People made millions of dollars overnight through sheer luck (that they of course attributed to their brilliant mind).

A new thing arrived: meme stocks: where retail investors together, through social media, drove worthless companies up by thousands of percents. Crypto currencies were more or less the same. Elon Musk would tweet about a Shiba Inu and a useless cryptocurrency named after a dog would shoot toward the moon.

Some people call it investing through community building. But what differentiates a community from senseless euphoria?

Inflation of 2022

Just when we thought the world was in full swing again, inflation arrived in late 2021 and slapped us awake. We had not seen real inflation since the 1980s, and at first, nobody took it seriously.

But inflation persisted through 2022, staying stubbornly above 6%. The Ukraine War made it worse — supply disruptions drove up gas, food, and then everything else. The Federal Reserve responded with the sharpest interest rate hikes in a generation, taking rates from near zero to over 5%.

The result was historic: for the first time ever, both stocks and bonds dropped more than 20% in a single year.

The meme stocks and crypto darlings of 2021 collapsed. Peloton lost 90%. Bitcoin fell from $69,000 to $16,000. The “genius traders” of the pandemic era went quiet.

Risk-loving investors who went all-in on stocks lost money. Risk-averse retirees who balanced with bonds also lost money. Nobody was spared.

The S&P 500 bottomed in October 2022, down 25% from its January peak. It felt like the end of an era.

But as we have seen before, the story was not over.

The AI Rally and What Came Next (2023-2025)

And then, just when the pessimists were settling into their “told you so” chairs, the market did what it always does: surprised everyone.

2023 was the recovery nobody saw coming. While headlines screamed about recession risks and banking crises (Silicon Valley Bank, anyone?), the S&P 500 quietly gained 24%. The catalyst? Artificial intelligence. ChatGPT launched in late 2022, and by mid-2023, every company on earth was racing to become an “AI company.”

Sound familiar? It should. We have seen this movie before with the internet in 1999.

By 2024, the “Magnificent Seven” tech stocks — Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla — were carrying the market to new all-time highs. The S&P 500 crossed 5,000 for the first time. Nvidia alone gained over 200% as the world scrambled to buy AI chips.

Everywhere you looked, people were quitting their jobs to become AI founders. VCs were throwing money at anything with “AI” in the pitch deck. Crypto was back. Meme stocks were back. The vibes were euphoric.

Then came 2025. Volatility returned. Markets wobbled as reality caught up with valuations. Interest rates stayed higher for longer than anyone expected. Some of the AI darlings stumbled when their actual revenue did not match their astronomical valuations.

And yet, through all of it — the panic of 2022, the surprise rally of 2023, the euphoria of 2024, and the correction of 2025 — the thesis held. Again.

If you had invested $100,000 in the S&P 500 at the absolute worst moment of the 2022 bear market and simply held, you would have had roughly $150,000 by early 2026. If you had panic-sold and waited on the sidelines, you missed it all.

The lesson writes itself, over and over: time in the market beats timing the market.

Should We Sell?

Based on what you’ve read, it seems because the stock market is overvalued today, we should sell because a crash will come eventually.

If that’s what you think, then you’re wrong.

Your logic is sound because we will always have another stock market crash.

But I am going to show why you should never sell your stocks in anticipation of a crash.

Below, I’ll give you four reasons why you should never try to act smart by “buying low and selling high” no matter how confident you are:

1. Stock prices are statistically proven to be RANDOM.
2. It’s IMPOSSIBLE to time the market (might as well call it gambling).
3. Being optimistic OR pessimistic about the market hurt us equally. Solution? Don’t feel. Inaction is the best action.
4. Over the next decades, stocks will always go up more than they go down.

Reason#1: Stock Prices Are Random

There is plenty of empirical (i.e., well-researched, data-backed) evidence telling us that the prices of stocks follow a random walk. This means the movement of stock prices from day to day DO NOT reflect any pattern.

Surprised? You should be. Our eyes think we see a series of ups and downs, and we think we see some patterns.

But even if you flip a coin every day for many days, you’ll also see patterns of ups and downs, even when knowing that coin flipping is random.

The stock market’s path every day is just like a series of random coin tosses. Past prices cannot and never have been able to predict future prices.

The chart below shows the outcome of 10,000 random coin tosses, a pure random walk.

If you saw a pattern, you’re biased to see patterns just like everyone else!

Reason #2: It’s Impossible to Time the Market

During the Dot-Com bubble of 2000, the stock market became technically overvalued starting in 1996, but the stock market did not crash until four years later after it went up by another 50%!

Had you pulled out your money in 1996, you would’ve lost big!

Trying to time the market by “selling high and buying low” is equivalent to rolling the chips in Las Vegas.

You could be years too early or days too late.

Be very aware of investment strategies that exploit anomalies, trying to predict future prices based on past prices.

Remember what we learned above: there are NO trends; everything is random, so past prices never predict future prices.

Any wins you might have banked from day trading is just pure luck.

Whenever someone on TV says they can predict the future, realize just because you see a pattern from lines on a chart doesn’t mean it isn’t all randomness.

The smartest people get it wrong all the time. What makes you a better guesser other than your urge to roll the dice?

The chart below shows all kinds of reasons people have used to tell you to SELL. But all of these reasons, LOOKING BACK, are wrong.

Whatever is happening today, the world feels like it’s going to end soon. But the world has been filled with scary news and has always felt like it might end.

Yet through the fears, the stock market kept rising.

Reason #3: Both Optimism and Pessimism Hurt Us

Here is what we know: the stock market goes up and down. That’s it.

But nobody knows when the next downturn will begin or when the future growth will kick-off.

There is no point in timing the market because the prices of stocks follow a random walk.

If you are overly optimistic about the stock market, you can get burned. If you are too cautious, you can miss a golden opportunity.

How can we remain neither overly optimistic or cautious? How can we capture the stock market growth while protecting ourselves from a crash?

We simply do nothing.

Research shows that those who forgot they had money in the stock market did better than those who cared about it and checked prices daily.

Why? Because inaction is the best action. Just set it and forget it and you will win.

The chart below shows how many days we had to wait to recover back the loss from a stock market crash.

The wait varied from a few days to years.

It is simply impossible to predict recovery (or crash).

Reason #4: The Stock Market Always Go Up Over a Long Period of Time

Over the entire history of the stock market, we know that stock prices are growing more than they are declining.

The chart below shows the annual stock market change. The green bar represents a growth year and the red a decline.

In the past 9 decades, growth years account for 75% of total years while decline years account for only 25%.

Translation: if you keep your money in the stock market for the long haul, you will make money.

Over the course of your life, you’ll experience a couple of heart-stopping, jaw-dropping declines, and many small drops. But if you stick with it, the stock market will on average go up, way up.

So put your money in a broad index fund and let it sit and grow on its own. If you’re interested, here are the Vanguard funds I recommend.

In fact, research from 1871 to 2012 has shown that if you had kept your money in the stock market for 20 years, 100% chance you will make a positive return.

More than 5 years, there is a 80% chance you will make a positive return.

The lesson? The longer you stay in the stock market, the higher the chance you will make money no matter when you invest.

It’s not about when you put your money in. It’s about keeping it in for as long as possible, preferably years.

The Market Will Crash Again. That’s Ok.

Nobody knows for sure when it’ll happen, but we know it will happen eventually.

Remember 1987 when most of the brilliant people fail to predict recessions?

It turns out that most economists failed to predict recessions every single time.

Don’t listen to “experts”. Don’t listen to me.

How do you REALLY beat an impending stock market crash? Well, read on!

How to Beat the Stock Market Crash?

We know that market crash always comes and that it’s not something you can predict to avoid. So what can you do?

All you can do is to strive to be neither overly optimistic or cautious and thus, to invest for the long-term.

More specifically, it means that you should:

1. Find your optimal allocation of assets
2. Make sure you have a nice stash of money in cash and assets not correlated with the stock market
3. Go live your life without watching the stock market on a daily basis!

1. Optimize Your Allocation

Invest more in stocks when you are young and less in stocks as you get older. And as you get older, slowly decrease the risk of your portfolio.

Not sure about your allocation? Follow Vanguard’s advice:

• Allocate 90% of your investment in the stock market until you are 40
• Allocate some of your stocks to international.
• By the time you retire, you should have 50% of your investment in stocks, then 30% by the time you reach your mid-70s.

To learn more about how to select across thousands of Vanguard funds, read this guide that talks about the best Vanguard funds for every stage of your life.

If you are nearing retirement, check out my guide on Vanguard Wellington, it is my all-time favorite fund for retirees.

2. Invest in Cash and Uncorrelated Assets

As you get older and mainly when you are closer to retirement, the money you invest outside of the stock market becomes more important.

You want to make sure when the stock market crashes; your non-stock assets do not crash, too.

For decades, the default option to buy uncorrelated assets is to buy bonds. However, in recent years, stock and bonds have risen and fallen in tandem due to near-zero interest rates.

But the Federal Reserve, starting in 2021, has increased interest rates. I believe we will be staying in high interest rate environment for a while. And that’s a good thing. It means we will have a viable choice between two uncorrelated assets: stocks and bonds, again.

3. Let the Stocks Stay in the Stock Market

You’ll be fine in the long run if you allocate your money across stocks, bonds, and cash. And maybe a tiny bit of crypto.

Have enough cash to spend for 2+ years, and just let the stocks sit there.

Even though a stock market crash might be coming, never try to time the market because that would just be gambling.

The chart below shows that sometimes you have to wait a long time before getting returns, but the wait is always (always!) worth it.

If you had bought stocks in 2000, you had to wait until 2013 to recover! That is 12 years of waiting. But the years after 2013 were the best, ever, at growing your net worth.

Rest assured, the market will always recover. Be patient. Stay in the game.

If you are young, live your life and invest in the long run.

If you are near retirement, make sure you have less than 50% of your assets in stocks and then you should be fine, too.

Then once all of this is done, get out of your daily stock market monitoring and go live your life.

What do you think? Are you as comfortable as I am to do nothing? Do you think you can predict a market crash? Comment below and let us know!

What’s Next?

Ever wonder, “Am I rich?” Read my latest analysis on the Average Net Worth by Age: What Is Considered Rich?

Vanguard is great, but out of its 3,000+ mutual funds, which one is for you? Check out Best Vanguard Funds for Every Stage of Your Life

Learn the secrets that make the Vanguard Wellington Fund the miracle to retiring wealthy. And whether you should this Vanguard Classic.

Try It Yourself: Crash Simulator

Numbers on a page are one thing. Seeing your actual portfolio value drop and recover is another. Use this simulator to pick any major crash in history and watch what would have happened to your money — whether you held or panicked and sold.