The stock market has experienced numerous crashes over the past 150 years. These crashes have varied in severity and duration, but they all share some common lessons. One key lesson is that it is impossible to predict how long a market recovery will take.
📈#Nifty recovers over 150 points off day’s low to close in green; Trent, BPCL lead
Here's how the markets panned out today!👇#Nifty50 #StockMarket #StockMarketIndia #stockmarketcrash #stockmarketscrash #StockMarketNews #StockMarketUpdate pic.twitter.com/BoK92ChwO8
— ET NOW (@ETNOWlive) March 11, 2025
Some crashes, like the COVID-19 downturn in 2020, saw the market recover in just four months. Others, like the Great Depression, took years for the market to fully recover.
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Ben Powell of BlackRock Investment Institute answers, as he opines on the fine print of America's growth and whether… pic.twitter.com/P9a93Mdai8
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Another important lesson is that investors who don’t panic and sell their holdings during a crash are often rewarded in the long run.
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— Mohamed A. El-Erian (@elerianm) March 11, 2025
While it can be tempting to cut losses and sell when the market is down, history shows that staying invested pays off over time. To measure the severity of a crash, experts use a “pain index” that considers both the degree of the decline and the time required to recover to the prior peak.
Lessons from historic stock market crashes
The crash of 1929, which kicked off the Great Depression, is used as the benchmark with a pain index of 100%. Some of the most severe crashes in the past 150 years include the Great Depression, the “Lost Decade” of the early 2000s, and the downturn in the 1970s caused by inflation, the Vietnam War, and the Watergate scandal. For example, if you had invested $100 before the 1929 crash, it would have declined to just $21 by 1932 and taken over four years to recover.
Similarly, a $100 investment before the “Lost Decade” would have dropped to $46 and taken until 2013 to fully recover. Despite the pain caused by these crashes, the market has always eventually recovered and gone on to reach new highs. This highlights the importance of maintaining a long-term perspective and not making rash decisions based on short-term market movements.
While navigating market downturns is never easy, understanding the history of past crashes can help investors better weather the storm. By staying disciplined and focused on the long term, investors can emerge from even the worst crashes with their portfolios intact.
