We usually talk about stock market performance on a yearly basis. And last year’s 18% Standard & Poor’s 500 index loss was nothing to write home about.
But during bad years, daily volatility can also spike. In 2022, the index’s worst day was Sept. 13, when it fell -4.3%. How does that one-day loss stack up against the worst days the stock market has seen in the past? It’s not even close.
On Oct. 19, 1987, the S&P 500 plunged by over -20%. That date, the biggest one-day decline in the market’s history, became known as Black Monday 1987. While it’s generally difficult to attribute daily market movements to any factor, that crash remains exceptionally mysterious. Some point to the rise of stock options and derivatives as the source of the problem. Others suggest it was caused by foreign investors driving prices up too rapidly. Whatever the cause, the event led to the creation of a circuit-breaker market reform that pauses trading during rapid sell-offs.
The second-worst day in history for market declines was Oct. 28, 1929, when the S&P dropped 12.3%. The following day (Black Tuesday) was No. 4, with the index shedding another 10.2%. The stock market gave up nearly $30 billion in value over those two days. By mid-November, the Dow Jones Industrial Average had lost almost half its value, and by mid-1932, it had declined by nearly 90%. It would take another 22 years for it to catch up to its previous high. No wonder everyone refers to this period as the Great Depression.
The third-biggest drop (12%) occurred March 16, 2020, shortly after the sixth-biggest decline (9.5%) March 12. The cause was the advent of the
COVID-19 pandemic, which led to the shutdown of large swaths of the economy and ushered in a period of high market volatility. The circuit breakers created after the 1987 decline halted trading four times that month. But unlike the crash of 1929, the market fully recovered after only a couple of months.
On Nov. 6, 1929, just a week after Black Tuesday and a surprising market rally, the DJIA experienced the market’s fifth-biggest drop, another 9.9%.
The seventh-largest decline occurred during the 1937 recession Oct. 18 (9.2%). That period represented the third-largest economic downturn of the 20th century (from May 1937 until June 1938), when unemployment reached 20% and real GDP fell almost 10%.
Nos. 8 and 9 occurred during the so-called Great Recession of 2008. On Oct. 15, the S&P 500 fell -9% and another 8.9% on Dec. 1. From its peak in October 2007 to its trough in March 2009, the large-cap index lost 57%. (The speed of the collapse began to accelerate Sept. 29 when Congress rejected a $700 billion bank bailout.)
The 10th-largest one-day decline occurred July 20, 1933 (just under 8.9%), in the midst of President Franklin D. Roosevelt’s aggressive actions to mitigate the Depression after taking office.
Most people will probably look back on 2022 as one of the worst years ever for their investment portfolio. But in the context of daily volatility, last year was relatively benign.
Los Altos resident Artie Green is founder of Cognizant Wealth Advisors (DBA: Perigon Wealth Management, LLC, a registered investment advisor). For more information, visit cognizantwealth.com.
