Bubbles and crashes

Markets have crashed for as long as they have existed. A few landmark moments, all with sources in the timeline below:

The South Sea Bubble (1720). The 1929 crash (the Dow fell about 89% peak to bottom by mid-1932). Black Monday 1987 (−22.6% in one day). The dot-com peak in March 2000. Lehman's bankruptcy in September 2008. The Flash Crash of May 2010. Negative oil futures in April 2020.

What links them: prices can move far more, and far faster, than models assume. See Volatility, Liquidity and Stop order.

Timeline for this chapter

1717–1720 · Bubbles and crashes
Mississippi Bubble (France): a state bank (Banque Royale) and the Compagnie des Indes were merged, notes were issued to buy shares, the money supply surged (monthly inflation ~23% in Jan 1720), and shares collapsed from ~10,000 to ~1,000 livres by Dec 1720. Its founder was dismissed and fled. guides.loc.gov, mshistorynow.mdah.ms.gov
1720 · Bubbles and crashes
The South Sea Bubble: London share prices, led by the South Sea Company (founded 1711 to help with war debt), rose unsustainably and crashed in autumn 1720, right after the Paris Mississippi Bubble. d-nb.info
June 1815 · Bubbles and crashes
MYTH: the tale that a banker learnt of Waterloo first (by carrier pigeon or private courier) and made a fortune by deceiving the London market. The Rothschild Archive and historian Brian Cathcart find no evidence: another man was first with the news, any gains were modest, and there was no trickery. The legend comes from an antisemitic 1846 Paris pamphlet signed 'Satan'. rothschildarchive.org, rothschildarchive.org
1884 / 26 May 1896 · Bubbles and crashes
Dow's first average (railroads) dates from 1884. The Dow Jones Industrial Average was first published on 26 May 1896. "Dow theory" was later systematised from the founder's editorials (no primary text for the "theory" itself). guides.loc.gov
Oct 1907 · Bubbles and crashes
Panic of 1907: runs on New York trust companies; the first worldwide financial crisis of the 20th century. It led to the monetary reform movement. federalreservehistory.org
1922–Nov 1923 · Bubbles and crashes
Weimar hyperinflation: the mark went from 4.2 per US dollar (pre-WWI) to 4.2 trillion per dollar by November 1923. The Rentenmark replaced it in November 1923. fraser.stlouisfed.org, bundesbank.de
Oct 1929 · Bubbles and crashes
The Dow fell nearly 13% on 28 Oct 1929 and about 89% peak to trough by mid-1932. federalreservehistory.org
1929–1941 · Bubbles and crashes
The Great Depression: 'the longest and deepest downturn in the history of the United States and the modern industrial economy'. The money supply fell nearly 30% from fall 1930 to winter 1933. federalreservehistory.org
19 Oct 1987 · Bubbles and crashes
Black Monday: the Dow fell 508.32 points (−22.6%) to 1,738.40, the largest one-day percentage drop. federalreservehistory.org, reuters.com
2 Jul 1997 · Bubbles and crashes
Thailand floated the baht, starting the Asian financial crisis. federalreservehistory.org, imf.org
Sept 1998 · Bubbles and crashes
LTCM near-failure: the New York Fed facilitated a $3.6bn private-sector recapitalisation (no Fed money). federalreservehistory.org
10 Mar 2000 · Bubbles and crashes
The dot-com peak: the Nasdaq index peaked at 5,048, then the bubble burst. goldmansachs.com
11–17 Sept 2001 · Bubbles and crashes
9/11: US stock markets stayed closed until 17 Sept, when the Dow fell 684.81 points (−7.1%). The Fed supplied emergency liquidity. federalreservehistory.org, money.cnn.com
15 Sept 2008 · Bubbles and crashes
Lehman Brothers filed for Chapter 11, the peak of the global financial crisis. federalreserve.gov, newyorkfed.org
Nov–Dec 2008 · Bubbles and crashes
QE and zero rates: the Fed began large-scale asset purchases (agency MBS and debt, 'QE1') in Nov 2008 and cut the funds target to 0–0.25% on 16 Dec 2008. federalreservehistory.org
6 May 2010 · Bubbles and crashes
Flash crash: the Dow briefly fell about 998.5 points (~9.2%) intraday and closed −347.80 (−3.2%). The joint SEC-CFTC staff report blamed a large automated E-mini sell order combined with algorithmic trading and liquidity withdrawal, and found two liquidity crises (E-mini/SPY and individual stocks). More than 20,000 trades were later cancelled as clearly erroneous. cftc.gov, sec.gov, reuters.com
2010–2012 · Bubbles and crashes
Euro debt crisis: Greece's first programme (on 2 May 2010 the Eurogroup agreed €80bn of pooled bilateral loans), then others. On 26 July 2012 the ECB President said the ECB was 'ready to do whatever it takes to preserve the euro'. ecb.europa.eu, economy-finance.ec.europa.eu
2018 · Bubbles and crashes
ESMA banned binary options for retail clients and restricted CFDs, citing excessive leverage and the structurally negative expected return of binaries. esma.europa.eu
Mar 2020 · Bubbles and crashes
COVID crash: US market-wide circuit breakers (Level 1, S&P 500 −7%) halted trading on 9, 12, 16 and 18 March 2020. sec.gov, govinfo.gov
20 Apr 2020 · Bubbles and crashes
May WTI futures settled at −$37.63, down from $17.73 earlier that day. The CFTC interim report found no single root cause. cftc.gov
Jan 2021 · Bubbles and crashes
GameStop / meme stocks: the SEC staff report covers the January 2021 surge, retail order flow, short interest, payment for order flow and broker trading restrictions. sec.gov

← Full timeline

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.