Market Crash
A sudden, severe decline in stock prices across a broad section of the market, typically 20% or more in a short period.
What is Market Crash?
A market crash is a sudden, dramatic fall in stock prices across a significant portion of the market, typically defined as a decline of 20% or more within a short time frame — days, weeks, or a few months. Crashes are characterized by panic selling, extreme volatility, and a loss of investor confidence. They can be triggered by economic shocks, financial crises, geopolitical events, or the bursting of speculative asset bubbles. Notable crashes include the 1929 Great Depression crash, the 1987 Black Monday (−22.6% in one day), the 2000–2002 dot-com bust, the 2008 financial crisis, and the 2020 COVID crash. Despite their severity, markets have historically recovered and reached new highs over multi-year time horizons.
Example
During the COVID-19 pandemic market crash of February–March 2020, the S&P 500 fell approximately 34% in just 33 days — the fastest 30%+ decline in history. Within 5 months, the index had fully recovered to pre-crash levels, and by year-end 2020 was up 16% for the year. Investors who sold in panic locked in losses; those who held — or bought more — were rewarded by the rapid recovery.