Get your finance in order, with wealth management's must-read stories everyday!

How does the 2020 Stock Market Crash Compare with Others?

Susan Kelly

Dec 24, 2023


On Monday, March 9, 2020, the Dow Jones Industrial Average (DJIA) had its most significant point decline in the record, signaling the start of the stock market crash of that year. Between March 12 and March 16, it was followed by two additional point losses that set records.

The 3 worst point declines in American history occurred during the share price crisis. The decline was brought on by unchecked global concerns over the coronavirus's development, a reduction in oil prices, and the potential for a recession in 2020.

Despite being severe, the 2020 market fall was brief. Even though many aspects of the U.S. economy remained complex, the stock market surprised many by recovering.

What Caused the 2020 Market Crash?

Since investors were concerned about the COVID-19 coronavirus pandemic's effects, the 2020 market crash happened. Numerous economic sectors were hurt by the virus's unknown risk and the closure of numerous enterprises and organizations due to state-issued lockdown orders. Investors anticipated that job losses would lead to high joblessness and diminished buying power.

The World Health Organization (WHO) classified the illness as an outbreak on March 11. The group was worried that the authorities weren't doing enough to halt the virus's rapid expansion.

Since President Donald Trump started trade fights with China and other nations, investors have been uneasy. The Dow had fallen from 29,551 on February 12 to 25,409 on February 28—a decrease of almost 14%. Once it ended at 25,766 on February 27, it had already had a correction of more than 10%.

Resulting from the 2020 Market Crash:

Stock market crashes frequently spark recessions. In the event of a pandemic with such an inverted gain curve, that probability increases even worse. When the yield on some relatively brief Treasury invoice is greater than the value on a 10-year Treasury memo, this is known as an inverted yield curve. This only happens when the short-term danger is higher than the long-term risk.

Investors typically don't require high returns when they lock up their investments for brief periods. When they secure it for a more extended period, they need more. However, whenever the yield slope inverts, entrepreneurs favor short-term returns over long-term ones. The initial downturn was accompanied by an upturned yield curve, which alarmed many investors.

Investors sought a better return for the one-month Treasury securities than the ten-year bond on March 9, 2020. Through this market signal, traders were expressing their concern about the effects of the coronavirus on the globe.

All-around bond yields are within historically low levels. When the market crashed, traders sold their stocks and bought bonds. The bond market was so strong that yields were lowered to historically low levels.

Bear markets typically endure about 22 months, whereas some have only lasted three. After the recession of 2020, the stock market had a surge in the summer or fall.

The Dow Jones began rising beyond 30,000 points by November 24, 2020. The S&P 500 and the Dow simultaneously hit record peaks on January 3 and January 4, 2022, respectively, as the market kept rising and breaking milestones.

How did it impact Investors?

Many people worry when a downturn begins and transfer their investments to prevent further losses. However, the stock industry's quick recovery following the disaster showed that many traders kept buying rather than selling in 2020 and 2021.

Investors may benefit or suffer during recessions. How people invest and control their feelings will determine whether they withstand a stock market crash. The S&P 500 or Dow Jones data show that investors kept making investments after the brief recession ended. If they had not been, the recession could have existed for a long time, and expenses wouldn't have risen as swiftly.

The Federal Reserve lowered its federal fund's benchmark rate range to zero in March 2020. Because of this, rates of interest on house, vehicle, and student loans also decreased, making it less costly to obtain a mortgage and perhaps a vehicle loan in 2020 as well as 2021. The sector did not see an equitable distribution of gains, and the surging share market would not always portend a complete recovery. Employees fared less well than investors, who generated significant profits across 2020 and into 2021.

At the start of the outbreak, the unemployment rate spiked, going from 3.5% in February reaching 14.7% in April 2020. The overall national unemployment rate didn't hit 3.6% before March 2022; however, it dropped significantly throughout the following year.

Taking These Steps Will Shorten the Duration of the 2020 Downturn:

After the share market crisis in 2020, there was a downturn. But after that, there was a sizable but unequally distributed rebound.

The federal government approved numerous bills to boost the growth both during the Trump as well as Biden regimes. Among these were assistance for particular industries, cash grants to taxpayers, enhancements in unemployment compensation, and housing vouchers.

These actions calmed investors even further, resulting in more stock market returns. The production and marketing of numerous COVID-19 vaccinations, which started during the Trump regime, also inspired investors.

Initially, specific individuals were only eligible for vaccinations based on health. President Biden ordered the provinces and regions to render all individuals eligible for vaccinations by May 1, 2021, during March 2021.

The 2020 stock market crash had never-before-seen driving forces. Market confidence, though, remained high because of a mix of a federal boost programme and vaccine research.

Stock market crash comparison:

Two Black Mondays preceding March 16, 2020, saw more significant percentage reductions in stock market crash comparison.

On October 19, 1987, or "Black Monday," the Dow dropped 22.6%.

On October 28th, or "Black Monday," 1929, the average fell by almost 13%. When the share price market crashed in 1929, causing the Economic Collapse, this was a portion of the four-day damage.

Key Learnings:

  • Just after the World Health Organization designated COVID-19 an official epidemic, the 2020 market crash got underway.
  • The most significant single-day decline in the history of the US share market occurred on March 16, 2020, when the Dow Jones fell by approximately 3,000 points.
  • Contrary to other past crashes, the marketplace immediately recovered and shattered records at the end of 2020 and early 2021.


Black Monday: Exactly what is it?

Oct. 19, 1987, is marked as Black Monday. A drop in the world stock market was brought on by the Dow Jones Manufacturing Index losing upwards of 20% in a solitary day. Any one thing caused the deterioration. Instead, it was brought on, at least partially by electronic orders, that at the time were still in their infancy. It might have been brought on by portfolio assurance, which included institutional traders hedging their investment portfolios through taking quick contracts in the S&P 500 and even an overbought bull marketplace overdue for a pullback.

Which factors contributed most to the stock market crash?

By then, productivity had already decreased, and joblessness had increased, resulting in overvalued equities. Low wages, the expansion of debt, a faltering agriculture industry, and an overflow of huge bank mortgages that could not have been repaid were some of the additional factors that led to that same stock market crash in 1929.

Do you think the market is currently a bear market?

The S&P 500 entered a bear market on January 3, 2022, while the bear market became officially declared on June 13, 2022. Using this anniversary as the formal beginning of the present bear market, a bear market including an average duration of 289 days might end on October 19, 2022.

Related Stories

Privacy Policy | Terms of Use

© 2023

Contact us at: [email protected]