The COVID 19 Crash of 2020: Fastest Bear Market Ever

The COVID-19 Crash

In early 2020 US stocks fell 34% in about five weeks as COVID 19 spread, then recovered within months. Learn the timeline, negative oil and the policy response.

Beginner4 min readUpdated 3 Oct 2026

Lesson 7 of 14

As COVID 19 spread worldwide in early 2020, financial markets suffered one of the fastest crashes on record. The S&P 500 fell about 34% from its peak on 19 February to its low on 23 March, the fastest decline of that size in its history. Market wide circuit breakers halted US trading four times in March, the VIX volatility index hit record closing highs, and even US Treasury markets struggled to function. Then, aided by massive central bank and government support, stocks recovered to new highs by August 2020, making it also one of the shortest bear markets ever.

Timeline#

Date	Event
January 2020	The outbreak spreads in China; markets are mostly calm
19 February	The S&P 500 closes at a record 3,386.15
Late February	Cases spread in Italy and elsewhere; stocks fall sharply
3 March	The Fed makes an emergency half point rate cut
9 March	An oil price war and virus fears trigger the first market wide circuit breaker halt
12, 16 and 18 March	Further circuit breaker halts; 16 March sees the S&P 500 fall about 12%
15 March	The Fed cuts rates to near zero and announces large asset purchases
16 March	The VIX closes at a record 82.69. See The VIX
23 March	The S&P 500 bottoms at 2,237.40; the Fed announces open ended asset purchases and new credit facilities
27 March	The CARES Act, a roughly $2 trillion US fiscal package, becomes law
20 April	The May WTI crude oil futures contract settles at minus $37.63 a barrel
18 August	The S&P 500 closes at a new record high

Circuit breakers in action#

US market wide circuit breakers halt trading for 15 minutes when the S&P 500 falls 7% (Level 1) or 13% (Level 2) from the prior close before 3:25 pm, and close the market for the day at 20% (Level 3). In March 2020, Level 1 halts occurred on four days. See Trading Halts and Circuit Breakers.

Negative oil prices#

Liquidity stress#

In mid March, investors rushed to cash. Even US Treasuries, normally the most liquid market, saw wide bid ask spreads and erratic prices. Corporate bond markets froze, and ETFs holding bonds traded at large discounts to their net asset values. The Fed responded with Treasury purchases, and for the first time, facilities to buy corporate bonds, including through ETFs. See Liquidity Risk and What Is an ETF?.

The policy response#

Response	Scale and detail
Rate cuts	The Fed cut to a range of 0% to 0.25%
Quantitative easing	Purchases of Treasuries and mortgage securities, open ended from 23 March. See Quantitative Easing and Tightening
Credit facilities	Support for commercial paper, corporate bonds, municipal debt and small business lending
Dollar swap lines	Supplying dollars to foreign central banks. See Cross-Currency Basis
Fiscal stimulus	The CARES Act and later packages; similar programmes worldwide

What followed#

The rebound was led by technology stocks, while travel, energy and hospitality lagged. Retail trading surged, with commission free brokers attracting millions of new accounts, setting the stage for the meme stock episode of early 2021. Later, the scale of stimulus contributed to the inflation surge of 2021 and 2022. See Inflation.

Lessons#

Crashes can be extremely fast, leaving no time to react. See Stress Testing and Scenario Analysis.
Policy responses can drive equally fast recoveries.
Liquidity can vanish even in the safest markets.
Futures expiry and delivery mechanics matter. See Rolling Futures Contracts.
Selling in panic locked in losses for those who missed the rebound. See Fear and Greed.

Frequently asked questions#

How much did stocks fall during the COVID crash?#

The S&P 500 fell about 34% from 19 February to 23 March 2020.

Why did oil prices go negative in 2020?#

Demand collapsed and storage filled, so holders of the expiring May WTI futures contract paid others to avoid taking physical delivery.

How long did the COVID bear market last?#

About a month from peak to trough, and the S&P 500 reached a new high by August 2020.

Next, learn about the hedge fund that nearly broke markets in The Collapse of LTCM.

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Next lessonThe Collapse of LTCMLong Term Capital Management, run by star traders and Nobel laureates, lost $4.6 billion in 1998 and needed a Fed organised rescue. Learn what went wrong and why.