Market history
Three stock market crashes, and how to replay them
The dot-com crash, the 2008 financial crisis and the 2020 pandemic drop all fall inside the years this simulator covers (1990 to 2025). Here is what happened, what the game's data shows, and what it cannot show.
Annual data versus what happened inside a year
The simulator uses one real return per year for each investment. The path inside the year is generated so the year ends at the right total. That means the game gets each year's result right, but it does not copy the real daily drops and rebounds. The methodology page explains how.
| Year | S&P 500 index fund | Gold |
|---|---|---|
| 1999 | +21% | +1% |
| 2000 | -9% | -6% |
| 2001 | -13% | +2% |
| 2002 | -26% | +25% |
| 2003 | +29% | +20% |
| 2007 | +5% | +31% |
| 2008 | -37% | +6% |
| 2009 | +26% | +24% |
| 2019 | +31% | +18% |
| 2020 | +18% | +25% |
| 2021 | +29% | -4% |
The dot-com crash (2000 to 2002)
In the late 1990s, prices of internet and technology companies rose far ahead of their profits. When that reversed, the market fell for three years in a row. In the game's data the S&P 500 fund loses value in 2000, 2001 and 2002. Many single technology stocks fell much further than the index. A Federal Reserve staff note covers this period, from the telecom and internet boom through the crash and the 2001 recession: FEDS Notes, "The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Narrative Investigation" (Federal Reserve Board, 2018).
The 2008 financial crisis
Losses on home loans spread through banks and the wider financial system. In the game's data 2008 is the worst year for the S&P 500 fund, and oil falls sharply too, while gold still rises. See Federal Reserve History on the Great Recession.
The 2020 pandemic drop
In early 2020 stocks fell very quickly, then recovered within the same year. Because the game uses annual returns, 2020 shows up as a positive year for the S&P 500 fund. The steep drop in the spring is not reproduced. This is a good example of why one number per year hides real risk. The Federal Reserve Board describes the 2020 market strain and its response in its 2020 Annual Report section on financial stability.
Why diversification does not remove all risk
Spreading money across different investments lowers the damage from any one of them failing. It does not stop the whole market from falling, and in 2008 most stocks fell together. Investor.gov explains asset allocation and diversification and the basics of investment risk. Our diversification lesson uses the game's own numbers.
Why hindsight makes the game easier
You already know these crashes happened and that markets later recovered. Real investors did not. If you pick a start year on purpose to avoid a crash, you are using knowledge nobody had at the time. Play Now picks a random start year for this reason. Treat a great score from a hand-picked period with suspicion.
Exercises to try
- Use Customize to start in 1998 for 10 years in Basic mode. Put all deposits in the S&P 500 fund. Then replay with the same settings and keep a third of each deposit in CDs or savings. Compare both returns with the benchmark. Moves inside each year and life events differ between runs, so treat one pair as a hint, not proof.
- Start in 2005 for 5 years. Write down what you will do if the index falls by a third in one year, before you start. Did you stick to it?
- Start in 2018 for 5 years. Notice that 2020 looks calm in the game, then read about what really happened that spring.
- Play a game with Play Now, which picks the start year for you, and compare it with a period you chose. The game still shows calendar years, so a random start stops you picking the period but does not remove hindsight.
This page explains history for learning. It is not investment advice and does not predict future markets. New to the controls? Read how to use the simulator.