Major Stock Market Crashes to Know for Capitalism

Major stock market crashes reveal the vulnerabilities within capitalism, showcasing how speculative behavior and economic factors can lead to widespread financial turmoil. These events highlight the interconnectedness of markets and the need for regulatory measures to protect against future crises.

1. The Wall Street Crash of 1929

   • Marked the beginning of the Great Depression, leading to widespread economic hardship.
   • Triggered by speculative investments and over-leveraging, resulting in a loss of confidence in the stock market.
   • The market lost nearly 90% of its value from its peak, causing massive bank failures and unemployment.

2. Black Monday (1987)

   • Occurred on October 19, 1987, when the Dow Jones Industrial Average fell by 22.6% in a single day.
   • Driven by a combination of program trading, overvaluation, and market psychology.
   • Highlighted the vulnerabilities of the stock market and led to regulatory changes to prevent future crashes.

3. Dot-com Bubble Burst (2000-2002)

   • Resulted from excessive speculation in internet-based companies, leading to inflated stock prices.
   • The NASDAQ index lost approximately 78% of its value from its peak, causing significant financial losses.
   • Exposed the risks of investing in unproven business models and led to a reevaluation of technology investments.

4. Global Financial Crisis (2008)

   • Triggered by the collapse of the housing market and the subprime mortgage crisis, leading to widespread bank failures.
   • Resulted in a severe recession, massive government bailouts, and significant regulatory reforms in the financial sector.
   • Highlighted systemic risks in the global financial system and the interconnectedness of markets.

5. COVID-19 Market Crash (2020)

   • Initiated by the global outbreak of COVID-19, leading to unprecedented economic shutdowns and uncertainty.
   • The stock market experienced rapid declines, with the S&P 500 dropping over 30% in a matter of weeks.
   • Prompted massive fiscal and monetary responses from governments and central banks to stabilize the economy.