Will the Stock Market Crash Again in 2025? Here's What History Shows.

Earlier this month, the Nasdaq Composite Index (NASDAQINDEX: ^IXIC), the S&P 500 (SNPINDEX: ^GSPC), and the Dow Jones Industrial Average (DJINDICES: ^DJI) fell more in one day than they had in years. All three major indices entered correction territory, with the Nasdaq briefly sliding into a bear market.

Although all three indices remain in correction, they have rebounded somewhat. However, many investors are likely wondering if this is only a temporary reprieve. Will the stock market crash again in 2025? Here's what history shows.

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A working definition

There isn't a hard-and-fast definition of exactly what constitutes a stock market crash. For example, the S&P 500 went into a bear market in 2022, falling as much as 25% below its previous peak. However, many observers didn't call this decline a crash because it happened over several months.

A stock market crash is a steep decline over a short period. But there isn't a universally agreed-upon threshold for how steep stocks must fall or how short the period must be for the decline to be considered a crash. The consensus, though, is that a stock market crash is a sell-off of at least 10% within a few days.

For this discussion, I'll use a working definition of a stock market crash as a double-digit percentage decline that occurs over five days or less. The big drops of the Nasdaq, S&P 500, and Dow following President Trump's announcement of reciprocal tariffs on most countries on April 2 met this definition.

Looking back

The most famous stock market crash occurred in 1929. The Dow plunged 13% on Oct. 29 of that year, a day that became known as "Black Monday." The index sank another 12% the next day. By mid-November, the Dow had lost nearly half of its value.

However, the Dow rebounded in the second half of November and even picked up momentum that extended through April 1930. It didn't last. Stocks eventually fell as much as 79% by May 1932.

Another "Black Monday" occurred on Oct. 19, 1987. The Dow plummeted almost 22% -- the largest single-day decline in the index's history. Stocks didn't crash again this time, but it took nearly two years for the Dow to recover.

^DJI data by YCharts

The most recent stock market crash was in early 2020 as the COVID-19 pandemic began. The S&P 500 fell 12% between Wednesday, Feb. 19, and Thursday, Feb. 27. Following a brief rebound, the index sank again by more than 10% between March 4 and March 9. It then bounced for one day before crashing yet again. The S&P continued to decline until bottoming out on March 23. However, stocks took off afterward and ended the year with positive gains.

^SPX data by YCharts

There have been many other stock market crashes through the years. Sometimes a crash is followed by another crash within a few weeks or months, but not always. However, it typically takes at least several months and sometimes years for a full recovery.

Looking ahead

So will the stock market crash again in 2025? History doesn't provide a clear answer. Importantly, different dynamics were at play with the previous market crashes than are present now.

A permanent suspension of the Trump administration's tariffs would probably take the prospects of another stock market crash anytime soon off the table completely. It would likely even spark a market rally. Could this happen? Maybe. The White House has already delayed some tariffs. Several lawsuits have also been filed that might result in federal courts ruling the tariffs as unconstitutional.

On the other hand, the longer uncertainty lingers, the higher the probability we could see another market decline of 10% or more this year. Whether or not this happens and, if so, if the declines occur rapidly enough to be classified as a crash, remains to be seen.

The best strategy for investors is to think long term. Stocks have eventually bounced back in every previous market crash. On this front at least, history will almost certainly repeat itself.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.