Explanation
- Dot-Com Crash (2000-2002): This major drawdown, spurred by the collapse of internet stocks, resulted in a 50% decline but saw a substantial recovery thereafter.
- 2008 Financial Crisis: Marked by the housing bubble burst, this period showed the deepest loss at -56.8% with a strong rebound in the following year, boosted by numerous fiscal and monetary stimuli.
- COVID-19 Pandemic: The rapid market reaction to global shutdowns led to a sharp -33.9% decline and a swift recovery helped by aggressive interventions and technological resilience.
- 2011 Eurozone Crisis: Triggered by multiple European sovereign defaults, this caused a -19.4% drawdown with a fairly quick bounce back.
- 2018 Correction: Caused by fears of rising rates and trade tensions, the market saw an approximately -19.8% drop and a confident recovery.
- 2022 Market Downturn: Occurred due to inflation fears and tightening by central banks, showing a -25.4% decline before recovery.
- 1998 Russian Default: Prompted by Russia’s default and devaluation, resulting in a rapid -19.3% decline.
- 2015-2016 Market Sell-off: Initiated by concerns about China’s economy, oil prices, and the strong US dollar, leading to a mild decline of -14.2%.
- Early 2000s Recession: A mild recession inducing a -13.2% decline, but relatively quick recovery.
- Long-Term Capital Crisis (1998): Caused by the collapse of LTCM hedge fund, with a sharp but short-lived decline.
These historical events highlight the nature of markets with significant downturns followed by robust recoveries.
What’s the adage in reverse, ‘what goes down, must come up.’
-Paul R. Rossi, CFA