Past Recessions and the Stock Market
It’s worth remembering that the only thing you can really tell from stock markets is how stock prices are faring. Troubling trends in the broader economy can materialize in the form of a stock market crash, but sometimes a crash is just a return to sanity after a period of frenzied enthusiasm among stock investors.
So, while crashes in 1929 and 2008 were signs of much more serious problems with the economy, massive crashes in 1987 and 2000-2001 were followed by relatively mild recessions that gave way to booming economic growth.
The crash in 1987 is still the single largest single-day decline in market history, but its long-term effects proved minimal when compared to the Great Depression or the Great Recession.
