A quarter of a century in the markets: how long have financial markets taken to recover from each crisis?

The first 25 years of the 21st century have been marked by periods of strong financial growth, interspersed with significant financial crises. These downturns have varied in nature, and in some cases, were triggered by unexpected events often described as “Black Swans”.

Creand Wealth Management, which specialises in private banking, examines in this article how financial markets have behaved following major periods of crisis. The aim is to analyse how long it took markets to recover and to assess the impact of those crises on the medium- and long-term performance of equity markets. 

The dot-com bubble (1999–2000)

The dot-com bubble refers to the period around the turn of the 21st century, when companies based on emerging technologies experienced rapid growth. This surge was accompanied by widespread uncertainty around new business models and overly optimistic profit expectations.

The crisis led to the collapse of many technology firms and significant job losses in the sector. Between 27 March 2000 and 9 October 2002, the Nasdaq-100 (the US index tracking the 100 largest technology companies) fell by more than 82%. It took 15 years for the index to recover. However, the strong growth from 2015 onwards has driven a remarkable rebound, with the index gaining more than 405% in value over the past decade.

The global financial crisis (2007–2008)

This was the most severe financial crisis since the Great Depression of 1929, triggered by a combination of excessive credit and lax lending standards in the issuance of subprime mortgages to borrowers with weak credit profiles. The sharp rise in mortgage debt led to a wave of foreclosures, ultimately resulting in the collapse of systemic institutions—most notably Lehman Brothers in September 2008. The situation escalated into a global crisis of confidence, bringing credit markets to a halt for both businesses and households.

The downturn in global financial markets persisted through to 2010. Using the MSCI World Index (a broad equity benchmark that captures mid- and large-cap performance across global developed markets) as a reference, we can see it took nearly six years (until February 2013) for markets to return to their pre-crisis highs. 

European sovereign debt and the euro-area crisis (2010–2012)

The rise in public and private debt levels worldwide, in efforts to stimulate growth and rescue institutions following the global financial crisis, laid the groundwork for a sovereign debt crisis. This crisis would go on to affect the European banking sector and the broader economic framework of the European Union. A wave of credit rating downgrades on sovereign debt followed for several European countries.

The impact was especially pronounced in Spain, Italy, Portugal and Greece, where chronic fiscal deficits were exacerbated by a lack of effective control measures. The erosion of confidence in these markets triggered a sell-off in the sovereign bonds of countries with higher risk exposure and led to a sharp rise in their risk premiums, culminating in a widespread loss of trust.

If we look at the performance of Spain and Italy—the two largest eurozone economies to be impacted by the debt crisis—the effects are clear. In Spain, the Ibex only returned to the 11,900-point mark in January 2025, despite having already come out of a downward trend following the 2007 crisis, when it had reached historic highs of 15,945 points in November 2007.

In Italy, the benchmark FTSE MIB suffered a steep 72% drop between 18 May 2007 and 9 March 2009. After a modest recovery later that year, it took almost nine years (until April 2018) to regain the 23,900-point level last seen in September 2009. 

The market crash triggered by the COVID-19 pandemic (2020)

The global pandemic caused by COVID-19 is another example of a Black Swan event for the markets. It struck the world unexpectedly in early 2020, leading to unprecedented lockdowns and closures on a global scale. Using the MSCI World Index as a reference, markets fell by 34% in just two months, from February to March 2020, driven by panic and a sudden halt in economic activity. In fact, two of the five largest stock market drops in history occurred almost consecutively during the early days of the health crisis: on 12 March 2020 (-9.9%) and 16 March 2020 (-9.9%).

Despite a nearly 20% drop between January and March 2020, the recovery was also remarkably swift. Markets had already returned to pre-pandemic levels by December of that same year. From that point on, equities experienced strong growth, fuelled by the momentum of major technology companies.

The impact of inflation and restrictive monetary policy (2021–2025)

Following the COVID-19 pandemic, the global economy entered a period marked by surging energy prices, unprecedented fiscal stimulus and a supply chain crisis that led to a significant rise in global inflation. This spike in prices, combined with tight monetary policies implemented by major central banks, presented several challenges for the economy. These included managing higher borrowing costs, falling investment and consumption, increased market volatility and the risk of economic stagnation.

Even so, the overall impact on financial markets was limited. According to the MSCI World Index, from the all-time high recorded in December 2021, when markets were riding a wave of momentum driven by the gradual return to normality following the COVID-19 pandemic, it took 26 months for equities to recover (February 2024). Since then, markets have shown steady growth.

The return of Donald Trump to the US presidency (2025)

The growth potential of stock markets in recent years, driven primarily by technology companies, has stalled following the return of Donald Trump to the US presidency for a second term. His aggressive tariff policy has triggered a global correction, with financial markets falling by more than 10%. The MSCI World Index dropped by 11.29% and only returned to pre-announcement levels (3,668 points) on 1 May 2025. Markets experienced particularly sharp declines following the so-called “Liberation Day” on 2 April, when Trump unveiled his sweeping tariff package. It is still too early to assess the short- and medium-term impact or predict how the markets will recover.

Patience, discipline and diversification

In a financial landscape that is constantly shifting and evolving, Black Swan events—those unpredictable shocks that can drastically disrupt markets—are an ever-present risk. From economic crises to global pandemics, events that seem distant or unlikely can materialise at any moment, undermining asset stability and putting traditional strategies to the test. Yet history offers a valuable lesson: patience and discipline, combined with proper diversification, are essential to both weathering and thriving during periods of uncertainty.

Remaining invested through sharp market downturns is far from reckless. On the contrary, it is often one of the most prudent decisions an investor can make. Juan Litrán, an analyst at Creand Family Office, explains: “Market corrections, no matter how painful they may seem in the short term, have historically laid the groundwork for long-term opportunities. Black Swan events, while challenging, also prompt a market recalibration which, for those who remain committed to a diversified investment strategy, can deliver significant returns once volatility subsides”.

Diversification, he adds, is far more than just a technique for mitigating risk; it becomes a lifeline in times of global uncertainty. According to Litrán, “by spreading risk across different asset classes, sectors and geographies, investors not only protect their portfolios from the unexpected, but also position themselves to benefit when markets recover”.

What may appear to be a Black Swan today, can often be seen as an opportunity in hindsight. “This is why it is essential for investors not to be swayed by emotion or panic, which can pull them away from their long-term goals. Investing requires vision, discipline and, above all, a well-diversified strategy that stands the test of time, even in the most turbulent periods”, Litrán concludes.