A Summary of Stock Market Crashes

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					Can one month really have that big an impact on your retirement? Until this year,
October has been the only month that severe crashes have occured in the stock market.
Since 2950, the S&P 500 index has performed reasonably well on average. In 36
years it rose while in only 24 did it fall. The average gain was slightly less than half a
 Crashes tend to be a very isolated event. Only 4 major ones have occurred in the last
90 years. A pretty good record for believing the market always goes up. A double digit
drop in the stock market averages is how many people define a crash. 1929 is
probably considered the most famous one.
 The Great Depression came afterwards and left an indelible mark in people's
memory. The S&P wasn't in existance then. Only the Dow Jones was present. It has
reasonably matched the data from the S&P in more recent crashes.
 Crashes have typically been preceded by significant increases in stock market
valuations. The Dow Jones had increased by several hundred percent leading up to the
29 crash. The color black is often used to describe these catastrophic events.
 The 1929 crash had both Black Thursday and Black Tuesday happen in less than a
week. October 24th and 29th saw the market drop 20% and 13% respectively. In just
those two days 33% of your wealth was evaporated.
 The next three years would continue that downward spiral. The market was cut by
more than 80% during that time frame. It was be more than 25 years before the
market would reach that level again. Twenty five years waiting to break even.
 Black Monday happened in 1987 on October 19th.
 Optimism had taken the market to new highs again. 1987 proved to be the end of
that phase in the stock market.
 Over a fiver year period, the market had risen significantly. Black Monday wasn't a
one day event though. It was the culmination of a four day drop in the market.
Monday saw a drop of over 20% in the market in a single day. The market had been
slowly trending down over the entire month before this happened.
 The next crash showed some similarities to 1987. It wasn't just a one day event. In
2008, the market spent a week in dropping relentlessly. It dropped 18% in what is
often referred to as Black Week. The length of the crash caused many people to be
significantly affected by it.
 In 2010 we had a Flash Crash. A huge sudden drop with nearly immediate recovery.
Since it didn't remain down, I doubt you can count this one as a true crash.
 With changes in the way we trade stocks, the question is will we have more of them?
Can we predict these events? Maybe not but we can listen to people who have a
viewpoint that may be different than the majority.
 Following the herd can be dangerous for your wealth. You can see a different
viewpoint by clicking Stock Market Prediction to see a different viewpoint on it. Find
out more about Stock Market Predictions here.