On this episode of Saving the American Dream, we’re talking about market crashes. What are they, and what has happened in the past?

There are a lot of different ideas about market crashes, but the true definition is a sudden, dramatic decline of stock prices across a significant cross-section of the stock market.

A 20% or greater drop would be considered a market crash, and they happened about once every 16 years, on average.

Since 1926, there have been three separate 20% to 29% calendar year drops. We’ve also had three separate drops over 30% over the same time. We have 70 years of the market being up and 25 years of the market being down over that period of time.

We have a historically average rate of return of 10%. In order to get that 10% over time, you’ve had to put up with the volatility that stock markets have.

2000-2022 Tech Crash

The tech crash started in early 2000 when the tech bubble started to burst and all the markets went down very fast. The Sept. 11 attacks happened during that same time and added to the problem.

2007-2009 Financial Crisis

Sept. 29, 2008, was the biggest single-day decline ever in the market. The problems started in 2007 and bottomed out in March 2009. It was a 17-month downfall.

The housing crisis happened at the same time, and people were losing their homes.

Listen to the full podcast or use the timestamps below to jump to a specific section.

Navigating the Show

[2:34] – What is a market crash?

[5:42] – Historical rate of return

[8:42] – 2000-02 tech crash

[11:32] – Tech crash markets

[16:25] – 2007-09 crisis

[18:42] – Diversification

[22:41] – Downturns and ups

“In order to get that 10% over time, you’ve had to put up with the volatility that stock markets have.”

– Michael Schulte