The S&P 500 lost 38.5% in 2008, its worst annual decline since the Great Depression.
The fall occurred during a global financial crisis rooted in the collapse of the U.S. housing boom, losses on mortgage-related securities, and severe stress in the banking system. Credit markets tightened as institutions became uncertain about one another’s financial condition.
The crisis intensified after Lehman Brothers filed for bankruptcy in September 2008. Governments and central banks responded with emergency lending, bank rescues, guarantees, interest-rate cuts, and other measures. Equity markets around the world fell as investors anticipated recession and widespread corporate losses.
The 38.5% figure describes the S&P 500’s calendar-year decline, not its largest single-day drop. The index continued falling into March 2009, when it reached the low associated with the broader 2007–2009 bear market.