🎯 In 30 seconds: US stocks have fallen 25% to 57% several times since the 1970s, and 89% in the Great Depression. Every one of those drops was eventually recovered, but the wait ranged from about six months to many years. That is why money you need soon doesn’t belong in stocks, and why selling after a crash locks in the loss.
The big ones
Peak-to-bottom drops and the date the index closed above its old high again. These are price-only figures, without dividends.
| Episode | Index | Peak to bottom | Drop | Back to old high |
|---|---|---|---|---|
| Great Depression | Dow | Sep 1929 to Jul 1932 | 89% | Nov 1954 |
| 1973–74 bear market | S&P 500 | Jan 1973 to Oct 1974 | 48% | Jul 1980 |
| 1987 crash | S&P 500 | Aug 1987 to Dec 1987 | 34% | Jul 1989 |
| Dot-com bust | S&P 500 | Mar 2000 to Oct 2002 | 49% | May 2007 |
| Financial crisis | S&P 500 | Oct 2007 to Mar 2009 | 57% | Mar 2013 |
| COVID crash | S&P 500 | Feb 2020 to Mar 2020 | 34% | Aug 2020 |
| 2022 bear market | S&P 500 | Jan 2022 to Oct 2022 | 25% | Jan 2024 |
On Black Monday, October 19, 1987, the Dow fell 22.6% in one day, still the largest one-day percentage drop in its history.
What the table hides
- Dividends shorten the wait. Someone who reinvested dividends recovered sooner than the price-only dates suggest, because they kept buying shares at low prices.
- Inflation lengthens it. After 1973–74, prices recovered by 1980, but high inflation meant buying power took longer.
- Diversification helped, usually. A total US bond index fund gained in each of 2000, 2001 and 2002 while stocks fell. In 2022 it lost about 13% alongside stocks, so bonds are a cushion, not a guarantee.
- Narrow markets took longer. The tech-heavy Nasdaq Composite did not close above its 2000 high until April 2015.
Worked example: buying through 2007–09
Two people each had $100,000 in an S&P 500 index fund at the October 2007 peak. At the March 2009 bottom both were down about 57%, to roughly $43,000.
| Investor A sells at the bottom | Keeps about $43,000 in cash; the loss is now permanent |
| Investor B holds and keeps contributing | Price alone was back to the old high by March 2013; new money added in 2008–09 bought shares at deep discounts |
The hardest part of investing is not picking funds. It is doing nothing when the news says do something.
What it means for a beginner
- Money for the next few years stays out of stocks. A recovery can take five years or more.
- Pick a mix you can hold through a 50% stock drop. If your portfolio is 60% stocks, a 50% stock crash is roughly a 30% portfolio drop.
- Keep an emergency fund so a job loss in a downturn doesn’t force you to sell low. See the emergency fund planner.
- Keep contributing. Regular buying during a decline is how recoveries pay off for savers.
- Write your rules now, while calm: “I rebalance once a year. I do not sell because of headlines.”