98 Years of the S&P 500: How Major Events Shaped Market History

Charts plot Robert Shiller's S&P Composite monthly-average series (1926–2024). Bull and bear markets are segmented with a 15% reversal threshold on monthly averages, and every percentage label is computed from the plotted data — note that daily and intraday extremes were often deeper than the monthly averages shown. The narrative framing draws on an analysis by Sensible Financial. All charts use logarithmic Y-axes — equal vertical distances represent equal percentage changes.

The Big Picture

A hundred dollars invested in the S&P 500 on January 1, 1926, with dividends reinvested, would have grown to approximately $1.48 million by 2024 — a compounded annual growth rate of 10.3%. That single number masks a century of crashes, wars, pandemics, and policy experiments. The theme of this whole article lives in that tension: every crash felt terminal while it was happening, and the system compounded anyway.

How does a line survive an 85% collapse and still end up at $1.48 million? The chart below shows the full journey. On a logarithmic scale, the long-term trend is unmistakable: an upward march punctuated by sharp but temporary setbacks. Hover over the line to see exact values at any point.

Over these 98 years, the market experienced 22 bull runs and 21 corrections of 15% or more (measured on monthly averages). Each crash felt unprecedented at the time. Each recovery seemed improbable. And yet the line kept climbing.

With those caveats on the table, let’s walk through the three major eras — watching, in each one, how the crash-of-the-decade felt like the end of the system, and wasn’t.

Era I: Depression, War, and Recovery (1926–1958)

The Roaring Twenties (+147%)

The S&P 500 rose two-and-a-half-fold between January 1926 and its September 1929 peak. Fueled by easy credit, rampant speculation, and a booming industrial economy, the market seemed unstoppable. Margin trading allowed investors to buy stocks with just 10% down.

The Great Depression (-85%)

Then came the crash. From September 1929 to June 1932, the S&P 500 fell from a monthly average of 31.3 to 4.8 — an 85% decline that remains the worst bear market in U.S. history (on daily closes, the drop was 86%, from 31.86 to 4.40). The index wouldn’t recover to its 1929 peak until September 1954, a full 25 years later.

The decline wasn’t a single event. It came in waves: an initial 34% crash in the fall of 1929, a deceptive +24% rebound into April 1930, then a grinding two-year, 81% descent as bank failures cascaded through the economy. By 1932, unemployment reached 25% and GDP had contracted by a third.

New Deal and False Starts

The recovery was equally turbulent. A furious +73% rally off the June 1932 lows lasted just three months before rolling over. FDR’s New Deal then sparked a more durable +82% advance into early 1934, and after another pullback the market gained +115% into early 1937. But the Roosevelt Recession of 1937-38 cut the market nearly in half again (-45%) when the government pulled back stimulus too early — a cautionary tale that would echo through future policy debates.

World War II (-39%, then +139%)

The outbreak of World War II sent markets into a long slide, down 39% to a bottom of 7.8 in April 1942. But as the U.S. war machine ramped up industrial production, the market began a sustained climb. By mid-1946, the S&P had risen 139% from its wartime low.

The Post-War Boom (+249%)

The longest bull market of this era stretched from mid-1949 to mid-1956 — seven years of growth driven by suburbanization, consumer spending, the baby boom, and America’s emergence as the world’s dominant industrial power, lifting the index 249%. The Eisenhower Recession of 1957 (-17%) was a brief interruption in an extraordinary run.

Era I in one line: the worst crash in history took 25 years to repair — and the investor who kept reinvesting dividends through it still came out far ahead. Terminal-feeling, not terminal.

Era II: Cold War, Oil, and Reaganomics (1959–1991)

Era I’s lesson was about surviving one giant collapse. Era II poses a different question: what happens when the market doesn’t crash spectacularly, but simply goes nowhere for a decade?

The Kennedy Slide (-22%)

The early 1960s opened with a sudden 22% decline in the first half of 1962, triggered by Kennedy’s confrontation with the steel industry and general overvaluation. But the drop was short-lived, and by January 1966 the market had gained 68% from its trough.

Go-Go Years and Nifty Fifty

The mid-1960s “Go-Go” era saw speculative enthusiasm around growth stocks and conglomerates. The “Nifty Fifty” — a group of blue-chip stocks considered safe at any price — drove the market to new highs through 1972. The S&P reached 120 in January 1973.

Vietnam, Oil, and Stagflation (-43%)

Then the world changed. The Vietnam War’s economic cost, Nixon’s wage-price controls, and the OPEC oil embargo of 1973 combined to produce the worst bear market since the Depression. The S&P fell 43% from its January 1973 peak, bottoming in late 1974 (the daily-close low of 62.28 came in October).

What followed was even more painful: a “lost decade” of stagflation — simultaneous high inflation and stagnant growth. From 1968 to 1982, the S&P 500 went essentially nowhere in real (inflation-adjusted) terms. An investor who bought at the 1968 peak didn’t see a real return for over 14 years.

Volcker’s Shock Therapy (-19%)

In 1980, Federal Reserve Chairman Paul Volcker raised interest rates to 19% to kill inflation. The short-term pain was severe — a 19% market decline and a deep recession — but it worked. Inflation fell from 14% to under 4% by 1983, setting the stage for the great bull market of the 1980s.

Reaganomics (+201%)

Tax cuts, deregulation, and falling interest rates fueled a spectacular five-year rally from 1982 to 1987. The S&P tripled, rising 201% from a monthly average of 109 to 329.

Black Monday (-27%)

On October 19, 1987, the market crashed 22.6% in a single day — the largest single-day percentage drop in history. Program trading and portfolio insurance strategies amplified the selling; peak to trough, monthly averages fell 27%. But unlike the Great Depression, the recovery was swift. By July 1989 — under two years — the market had set new highs. The lesson: not all crashes lead to prolonged bear markets.

Era II in one line: the enemy changed — from collapse to inflation — but the pattern held. The decade that felt permanently stuck ended with the launch pad for the biggest bull market ever.

Era III: The Modern Market (1992–2024)

By the 1990s the players had learned Era I’s lesson: central banks now intervene fast and hard. Era III tests whether that changes the crash-recovery pattern — and it does, in one specific way: the crashes stay violent, but the recoveries keep getting shorter.

The Roaring Nineties (+516%)

The bull market that began after Black Monday ran for nearly thirteen years — the longest on record — gaining 516%. Globalization, the tech revolution, and the longest economic expansion in U.S. history propelled the market from 416 in early 1992 to nearly 1,500 by 2000.

The Asian Financial Crisis of 1998 (-12% on monthly averages, a 19% slide in daily closes) was over in two months. It barely registered as a pause in the bull run.

The Dot-com Bust (-44%)

The bubble burst in 2000. Hundreds of internet companies with no profits (and sometimes no revenue) saw their stocks collapse. The S&P fell 44% over the next two and a half years — the daily-close bottom of 777 came in October 2002, and monthly averages troughed in early 2003. The September 11 attacks in 2001 accelerated the decline but weren’t the primary cause.

The Housing Bubble and Great Recession (-51%)

After recovering from the dot-com bust, the market was hit by an even larger crisis. The subprime mortgage meltdown and collapse of major financial institutions (Bear Stearns, Lehman Brothers, AIG) triggered a 51% decline — the worst since the Depression. The S&P bottomed in March 2009, touching an intraday low of 667.

The recovery was fueled by unprecedented Federal Reserve intervention — quantitative easing, near-zero interest rates, and bank bailouts. From the 2009 low, the market began a bull run that would last over a decade.

The Post-GFC Bull Run (+333%)

From March 2009 to early 2020, the market rose 333% over nearly eleven years — one of the longest bull markets in history (the 2011 euro-crisis dip of 12% never reached correction territory on monthly averages). Low interest rates, tech-driven productivity gains, and corporate tax cuts all contributed. By February 2020, the S&P had reached a daily-close peak of 3,386.

COVID-19 (-34%)

The pandemic crash of March 2020 was the fastest 30% decline ever — it took just 22 trading days, and daily closes fell 34% peak to trough. The crash and rebound happened so fast that monthly averages, which smooth within-month swings, dropped only 19%. It was also followed by the fastest recovery ever: within six months, the market had fully recovered, driven by massive fiscal stimulus, Federal Reserve intervention, and a shift toward technology that benefited the largest companies.

Inflation Returns (-25%)

Russia’s invasion of Ukraine in 2022, combined with post-pandemic inflation and aggressive Fed rate hikes, produced a 25% decline in daily closes over 10 months (20% on monthly averages). By late 2023, the market had recovered again, driven by the AI boom and resilient corporate earnings.

Era III in one line: three 30-50% crashes in three decades, each recovered faster than the last — 7 years, 5.4 years, 6 months. The system didn't stop crashing; it got faster at absorbing crashes.

Bull vs. Bear: By the Numbers

Three eras of anecdotes invite a statistical question: across all 43 swings, are the ups actually bigger than the downs — or does it just feel that way in hindsight? The answer is unambiguous: bull markets are longer and larger than bear markets. Measured on monthly averages with a 15% reversal threshold, the average bull run gains 115% over 3.3 years. The average decline loses 30% over 1.2 years.

The asymmetry is striking. Markets spend far more time going up than going down. But bear markets are psychologically devastating precisely because they are concentrated and violent. A 50% decline requires a 100% gain to recover — which is why crashes feel so much worse than rallies feel good.

Recovery Times

How long does it take to recover from a crash? The answer varies enormously:

• COVID crash (2020): 6 months to full recovery
• Black Monday (1987): just under 2 years
• Dot-com bust (2000): about 7 years to break even
• Housing crisis (2007): 5.4 years
• Great Depression (1929): 25 years — though dividends reinvested cut this significantly

The trend is toward faster recoveries, likely because modern central banks intervene more aggressively than their predecessors. The Federal Reserve’s toolkit has expanded dramatically since the 1930s.

Valuation Through the Decades

If crashes can’t be timed, is there anything in the data that says something about the future? Price alone doesn’t tell you whether the market is cheap or expensive. For that, we need a valuation metric. The Shiller PE Ratio (also called CAPE — Cyclically Adjusted Price-to-Earnings) divides the S&P 500’s price by the average of the past 10 years of inflation-adjusted earnings. By smoothing out short-term profit swings, it provides a more stable read on whether stocks are historically cheap or overpriced.

The pattern is striking. The two highest CAPE readings in history — 44 in late 1999 and 39 in late 2021 — both preceded significant drawdowns. The lowest readings — single digits in 1932, 1942, and 1982 — marked the starting points of some of the greatest bull markets ever. In mid-1982, with CAPE below 7, the next 18 years would deliver a more than 13-fold increase in the S&P 500.

But CAPE is not a timing tool. By late 1996 the ratio had surpassed its 1929 peak of 27 — already “expensive” by historical standards — and the market still doubled over the following three years before the dot-com crash.

Key Takeaways

References