Stock market crashes, terrorist attacks, hedge fund collapses… there have been numerous share market crises over the past century. Many recover with time, although some like the Japan Nikkei have not after the Japan asset bubble crashed more than 25 years ago.
Here are a few historic market crash examples predominantly illustrating the impact they had on the share markets in Australia and the US.
This chart shows how long the market took to return to its previous level after the event selected. Each market reacts and recovers differently to a crisis.
We start with a notional $10,000 investment just before the event, then use monthly returns of the S&P/ASX200 Accumulation Index (Source: Datastream) to show how the Australia sharemarket fluctuated until returning to the starting value of $10,000.
Remember, indices are not a representation of a financial product - they do not take account of costs or tax and do not reflect the performance of any individual portfolio of stocks.
Past performance is not a reliable indicator of future performance. Investing in shares is subject to risk, and there is no guarantee that an individual investor will make a profit by investing in sharemarkets.