There have never been mass business closings, but there hasn’t been much growth. However, Japanese investors have never fully regained their confidence in the stock market. The government installed subtle controls in their financial system, but it took decades for the market – and the economy – to recover. The 1990s are known in the country as “The Lost Decade”.
4, The dot com bubble explosion of 2000
Over the past decade, it has witnessed the internet revolution affecting both people’s professional and personal lives. Companies with “.com” in their title gained – 12 large-cap stocks gained more than 1,000%. Investors were ignorant of the fact that not every company tied to the World Wide Web can maintain its growth or formulate a viable business plan.
When they found out, they started selling. By October 2002, the tech-heavy Nasdaq had fallen more than 75% from its March 2000 high. The high profile victims included Pets.com, Toys.com, and WebVan.com, as well as numerous other internet companies.
The crash resulted in the Sarbanes-Oxley Act of 2002, which was created to protect investors from corporate fraud. Investors were aware of the risks and did better due diligence before investing more money in internet funds.
5, The 2007-08 subprime mortgage crisis
Lenders were practically giving money to underqualified homebuyers, and investors were buying mortgage-backed securities and other new investments based on these “subprime” loans. Eventually borrowers began to default on debt, house prices fell, and investments based on them fell in value. In 2008 the stock market began to fall – and by early September it was down nearly 20%.