Decade in Review – What Caused the Worst Stock Market Declines in 2010-2019?

“…have an adequate idea of stock market history, in terms, particularly, of the major fluctuations. With this background you may be in a position to form some worthwhile judgment of the attractiveness or dangers…of the market.”

– Ben Graham

As I write this, worldwide stock markets are reeling from scary headlines of the spread of the coronavirus. Over the last 2 days, the Dow is down more than 6%, the 89th worst 2 day stretch in history.

I thought it would be fun to look at the major stock market declines of last decade – to get an “adequate idea of stock market history”, as Ben Graham said, in order to form judgement on how we should be reacting to today’s headlines.

Before reading, take a minute to try and recall the worst news headlines from the past decade. What was worth panicking over? How did the stock market react? How did you react?

History tells us that what seems important today is often forgotten tomorrow. And it tells us that the last thing you should be doing in panicking and selling your investments.

Don’t believe me? Below we have a collection of the major headlines in the past decade that moved markets and caused thousands to panic.

How many of these do you even remember?

What seems significant today?

Worst Stock Market Drawdowns Each Year from 2010-2019:

2010 – First Flash Crash of the Decade

2010 was responsible for one of the most memorable stock market trading days of the decade.

May 6th, 2010 saw a “Flash Crash” which saw the Dow Jones Industrial Average fall 9% – Equivalent to a 2,800 point decline in the Dow today!

The flash crash would be part of a larger decline that would see stocks fall 16% from their April 2010 highs.

Stocks would recover 4 months later, helped by a nearly 10% rise in September alone, and continue their march higher.

Top Events of 2010:

  • 10% decline to start the year.
  • Highest California unemployment ever
  • Beginning of European debt problems
  • 9% flash crash
  • BP Oil spill
  • Ireland bailout

2011 – USA Loses its AAA Credit Rating

August 6th, 2011 would see the United States lose its AAA credit rating for the first time in history.

The downgrade came as politicians were bringing the US closer to a default on its debt.

In addition to the US credit rating downgrade, August 2011 saw the European debt crisis build. Fear over debt from Greece, Spain, and Portugal would last for years, but August 2011 saw the first big declines blamed on the European debt crisis:

All combined, US stocks would fall nearly 20% from May 2011 to October 2011. It would take until February 2011 for the stock markets to recover.

Top Events of 2011

  • Occupy Wall Street Movement
  • Japan Tsunami
  • Mideast unrest (Tunisia, Egypt, Yemen, Bahrain)
  • US credit rating downgrade
  • Eurozone debt crisis

2012 – “Death of Equities”

2012 would be a great year for the US stock market – with the S&P 500 up 11%. But that wouldn’t come without some excitement in the middle of the year.

May 2012 would be the worst month for the stock market since the 2010 flash crash, sending US stocks down nearly 7%:

Top Events of 2012

  • “Bond King” Bill Gross proclaims – “We are witnessing the death of equities” (Read his letter here)
  • Facebook IPO – stock falls more than 50% in the first 6 months after its IPO.
  • Apple stock declines 30% during the last quarter of the year.

2013 – Recovery!

2013 was not filled with many fearful headlines. The year actually marked the official recovery from the financial crisis the decade before.

On March 28th, 2013 the S&P 500 would close at 1569 – The index’s first new high in more than 5 years!

US stocks would not even have a 10% decline during the year! Minor declines were said to be from trader’s fear of the Federal Reserve unwinding stimulus and perhaps raising rates.

Top Events of 2013

  • Gold falls 28% during the year. Its worst year of performance in 32 years.
  • Dow falls 550 points (3.5%) over 2 day stretch in June.

2014 – Ebola

Stocks continued with their climb, and stability, in 2014. The year marked the second in a row without a 10% decline – Although it was close.

The most excitement came in October, when volatility from overseas market finally came to the US.

Ebola was spreading through Africa, leading to 5 consecutive days with 200+ point moves in the Dow. In total, Ebola would send the US Stock market down about 8% during October.

Although the general stock market was pretty well insulated from major moves, Airlines and Energy stocks both took significant hits during the year, with many falling more than 20% from their highs in October.

Top Events of 2014

  • Rise of the Islamic State
  • Big political shift as Republicans take House, Senate
  • Oil prices fall 50% in last half of year
  • Ebola epidemic leaves 7,500 dead

2015 – The Great Fall of China

2015 was relatively calm for the first half of the year – But it didn’t last.

August of 2015 saw tremendous volatility in Asian stock market that spread to the US and European markets.

August 24th saw “Black Monday” for the Chinese market, when stocks fell 8% in a single day. By August 25th, the Shanghai stock index was down more than 40% from its highs just 2 months prior!

The decline spilled over to the US markets, but not nearly as bad. US markets saw a 12% decline as the turmoil unfolded in China.

Top Events of 2015

  • “Worst year since 2008”
  • 40% decline in China’s stock market

2016 – “Sell Everything”

Looking back, the decline from early 2016 doesn’t look like much, but it sure didn’t seem that way at the time.

2016 was the worst start to a year in the history of the US stock market.

The rapid decline early in the year led to one of the most dire headlines since the financial crisis 8 years prior:

“Sell Everything”

But there would be more significant events in 2016 – Next up was Brexit.

The stock market’s reaction to the surprise Brexit vote would be equivalent to its reaction after Pearl Harbor.

2016 finished up with one more politically induced panic – The election of Donald Trump.

Initially, US stock futures would decline more than 4% overnight, the Mexican peso would decline nearly 13%, and gold would spike nearly 4%. However, things would sort themselves out – just 24 hours later the market was largely unchanged.

It would take the markets 3 months to recover from the declines at the start of the year, and less than one month to recover from Brexit.

US Stocks would finish the year up more than 10%, right near all time highs, and up more than 20% from the January lows.

Top Events of 2016

  • “Sell everything” call in January, worst start to a year in history.
  • Brexit
  • Trump election

2017 – Natural Disasters

2017 was very calm with respect to stock market volatility. The year never even saw a 5% decline!

However, that doesn’t mean there were not news headlines designed to scare you. Here’s the notable events for 2017:

Top Events of 2017

  • 3 major hurricanes (Harvey, Irma, Maria), $210+ billion in damage
  • Trump drama
  • North Korean missile tests
  • Best year for the stock market in 22 years, 80 new highs during the year (which must mean the good times must come to an end soon, right?!)

2018 – First 1,000 Point Dow Decline

2018 started off on a rough note. The Dow saw multiple 1,000 point declines in February, sparking fears that the good times for US stocks were over.

February 5th and 8th both saw 1,000+ point declines.

Top Events of 2018

  • 2 separate 1,000 point declines in February
  • Midterm elections, Dems take control of the House
  • Steep decline in late December, stocks fall 20%.
  • “Worst year since 2008”
  • Bitcoin prices fall 75%
  • All 3 major stock indices close lower for first time since 2008

2019 – China Trade War

After an exciting end to 2018, investors were due for some calm in 2019 – And that is what they got.

The year would pass without a 10% decline, but a couple volatile days make it close.

Headlines about the potential trade war with China first appeared in May, which sent the stock market down just over 6%.

Then in August, headlines would return and cause 3 more particularly wild days for investors. August 5th, 14th, and 23rd would see the Dow drop 700, 800, and 600 points respectively. Half of the days in August would see 1% or more price swings in the S&P 500.

However, these scary headlines could not stop the market from having one of its best years in decades. By the end of the year, the US stock market would be up 29%!

Top Events of 2019

  • Longest US Government shutdown in history
  • China Trade War
  • Trump impeachment

2020 and Beyond

Be honest – How many of these headlines over the last 10 years had you forgotten about?

Every single one of these stories were set in large bold font on the front page of every paper. Thousands of investors sold from news of rising rates, ebola, brexit, China’s trade war, and more.

And today, every single one seems largely inconsequential.

Even with all of these events in the last decade – The US stock market finished up 256% from January 2010 through December 2019. What a run!

As we start another decade, news headlines are already grabbing for your attention. There have been 1,000 point Dow declines, CNBC has had a “Markets in Turmoil” special, and President Trump even tweeted to try and calm the markets – And we are just a couple months in!

If history has any lessons for us, it is that the next decade will be no different than the last. After 2020, the Coronavirus will be a distant memory, replaced with the next big political headline, natural disaster, or scandal.

How will you act when that next headline comes?

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