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Stock Market Crash. What is a stock market crash and how does it affect investors?
What goes up must come down. Sounds simple enough, sure. But when applied the stock market, this old saying carries a lot of weight. Because when the stock market comes down after having went up over a long period, the devastation it sometimes leaves behind is horrible.
The worst stock market crash in United States lasted from 1930 to 1932. According to reports, investors lost almost 90 percent of their money over the course of the crash. Even more astounding than the amount of money lost, however, was that it took. Some accounts atate that it took 22 years for the market to fully recover from the stock market crash.
One source defines a stock market crash as a precipitous drop in market prices or economic conditions. This is probably a more subtle definition than most. But a stock market crash, in reality, is anything but subtle.
When a bear market hits and erases gains achieved over the course of the bull market, these results can be disastrous. Bear markets bring with them sluggish economic growth, low job growth rates, falling stock prices, slowing GDP and declining consumer confidence.
While the factors leading up a stock market crash may differ from case to case, one underlying emotion they generate is panic.a cousin of fear. The fact that bull markets cannot last forever seems to have little ability to soothe panic in the midst of a stock market crash.
As far as drama goes, the stock market crashes in 1929 and 1987 were among the most publicized. In both cases, the market had been booming, with people raking in money left, right and center. There were voices in the crowd warning people that the boom would soon go bust, but, still, many people were unprepared when the inevitable occurred. And when a stock market crash materializes, almost suddenly, much of the wealth made during the boom disappears.
The crash of 1987, which saw the stock market drop 508 points, was, experts say, the worst crash since 1929.
Fear of an impending drop in stock prices may have been the contributing factor to the stock market crash of 1987. Even as people were glorying in their profits, they were also concerned that the markets could never sustain such conditions over the long term. And they were right.
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