The share market can be a roller coaster ride with both incredible highs and devastating lows. Throughout history, there have been many market crashes that have left a lasting impression on investors. In this article, we’ll take a look at some of the biggest share market crashes throughout history and how they continue to shape the investment world today.
1. An Overview of Financial Meltdowns: The History of Share Market Crashes
The share market has experienced some devastating crashes throughout history. From the Wall Street Crash of 1929 to the Dotcom Bubble of the 1990s to the Global Financial Crisis in 2008, the share market has not been without its collapses. Let’s take a look at some of financial history’s biggest meltdowns:
- The Wall Street Crash of 1929, which is widely viewed as the start of the Great Depression, sent the Dow Jones Industrial Average plummeting 12.8% on October 28. In the days following, the index continued to fall, ending with an 89% drop from its peak value in 1929.
- The 1987 market crash was sparked by an intraday plunge of 22.6%, the largest one-day percentage drop in stock market history. This crash was largely caused by a geopolitical shock in the Middle East.
- The Dotcom bubble of the late 90s saw stocks in technology companies, such as Cisco and Microsoft, quickly surge to amazing heights before crashing back to earth in early 2000, wiping out billions in market value.
- The global financial crisis of 2008 was brought about by the housing market crash of 2007 and the failure of numerous financial institutions, leading to a deep recession worldwide.
Although these crashes were largely unforeseen, they shared a common denominator: the investors’ inability to accurately assess risk. Each of these events hammered the share market and sent shockwaves through the global economy. Despite these downturns, many investors still have faith in the stock market’s long-term growth potential.
2. Examining the Greatest Era of Collapse: The ’29 Crash
The ’29 Crash
The 1929 stock market crash continues to be remembered as one of the most dramatic moments in U.S. history, a defining period of economic deconstruction and failure. Before the crash, investors were in a frenzy spurred by speculation and the promise of limitless wealth through stock purchases, until October 29 when the economy came to a crashing halt in Black Tuesday, sending the entire Wall Street exchange into chaos.
The crash was an unparalleled event which took its toll on the economy and inspired a certain fear of investment in the public. Its effects were felt not only in America, but seemed to reverberate throughout the world. Unemployment almost quadrupled and countless families were suddenly swept into poverty. Citizens began experiencing food shortages and had to cope with banks failing and businesses closing their doors.
The American people could only look in confusion and fear as the nation plunged into the depths of hardship. Some of the most apparent effects included:
- The emergance of public insecurity regarding the economy.
- The sudden increase of poverty and spotaneous debt amongst citizens.
- The sudden and brutal delcine of both economic and employment rate.
- The sudden decrease in global stock prices.
- The monumental losses fomented by investors.
The reverberations of the crash could be felt in almost every corner of the world, and ensuring that it wouldn’t happen again became paramount objective of the American government. The Great Depression is an era of history which continues to be seen as an icon of economic destruction, and the ’29 Crash is the most remembered and discussed instance these dark days.
3. Navigating the Asian Crisis: Share Market Falls in the Late 1990s
The late 90s saw a number of Asian markets fall drastically, and navigating them has been a challenge ever since. Here are three key points to bear in mind that can help guide you through this crisis:
- Reduction in trading activity: The fall in the Asian markets led to a decline in trading activity, which meant less liquidity in the markets. This caused stock prices to plummet and an investor’s ability to offload shares was limited.
- Miscalculations in stock prices: The Asian markets were miscalculating stock prices. Many stocks that were initially overvalued, began to drop in value and the general sentiment was to sell quickly to avoid further losses.
- Lack of trust and confidence in the markets: The turbulent times led to a lack of trust and confidence in Asian markets. Investors felt that buying stock was a risky endeavour, leading to reduced investment opportunities.
In order to survive and thrive in the Asian markets of the 90s, investors have had to be strategic in their strategy and judicious with their investments. By being aware of market fluctuations and understanding the key points that triggered the Asian crisis, investors can navigate their way through these turbulent waters.
4. Preparing for the Future: Lessons from Share Market Crashes
We all want to grow our wealth and have financial success in life, the stock markets are a way to do this. While it can be a great way to make money, there are risks involved. The importance of preparing for a share market crash can not be underestimated. Here are some lessons to keep in mind when investing in the share market:
- Diversify: The old adage ‘don’t put all your eggs in one basket’ applies even more when investing. Diversifying your investments across sectors can help reduce your risk if one area crashes.
- Start small: Don’t rush into investing large amounts of money straight away. Try starting at smaller amounts, and gradually increasing your investments when you have more understanding.
- Understand the risks: Have an understanding of market trends before you invest, and make sure you understand the potential risks associated with the investment as well as the advantages.
It’s important to be aware that investments can fail, as well as succeed. Educating yourself about what you can do to prepare for the future will let you be prepared, whatever happens. Consider it an investment in yourself. Ideally, the actions you take today can turn into a substantial return some years down the line.
Share Market crashes throughout history have no doubt caused disruption and upheaval in the market, but they also provide an opportunity to learn from mistakes and better prepare for future challenges. Despite their considerable destructive capacity, these crashes have in many cases been the precursor to an even greater rise in the market, a reminder that even the darkest of clouds often has a silver lining.