The 1929 market crash remains the most infamous collapse in stock market history. Yet for many investors, it feels like a distant event—something that could never happen again.
But when markets reach extreme highs, history has a way of repeating itself. Today's conditions look disturbingly familiar to the periods that preceded 1929, 2000, and 2008.
Right now, the Dow Jones, NASDAQ, and S&P 500 all sit near record highs. Investor optimism remains elevated even in the face of trade disputes, geopolitical uncertainty, persistent inflation pressures, and slowing global growth. Valuations have surged to levels that increasingly defy fundamentals. That same combination of euphoria and complacency defined markets before each of the last three major crashes.
Between 1923 and 1929, the Dow Jones rose roughly 300%. Investors believed stocks could only go higher. Speculation fueled massive gains, often disconnected from corporate earnings. When reality set in, the Dow collapsed 86% between 1929 and 1932.
Unfortunately, many weren't prepared. The result was not just financial ruin for unprepared investors, but a decade-long economic depression.
The pattern repeated in 2000. Dot-com optimism drove valuations to extremes as investors piled into technology stocks with little regard for profitability. When the bubble burst, the NASDAQ lost nearly 80% of its value. Again, many were unprepared.
Then, in 2008, housing speculation and excessive leverage pushed markets to another unsustainable peak. The Dow reached 14,038 before collapsing to near 6,500. Portfolios built solely for growth were devastated.
Today, warning signs are once again flashing. The Shiller P/E ratio sits near 40.66—its second-highest reading in history and just below the 44.19 peak reached during the dot-com bubble. While no one can predict the exact timing of the next downturn, investors can prepare by incorporating strategies designed to benefit from rising volatility rather than falling victim to it.
One way to do that is by using volatility-linked ETFs that tend to rise when markets fall sharply.
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ProShares Ultra VIX Short-Term Futures ETF (UVXY) is designed to deliver two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. This makes it one of the most aggressive ways for investors to gain exposure to market volatility.
UVXY does not track the VIX directly. Instead, it uses futures contracts tied to the VIX, which measures expected market volatility over the next 30 days. During market selloffs or periods of panic, volatility often spikes dramatically. When that happens, UVXY can post explosive short-term gains.
However, this leverage also makes UVXY extremely volatile. Because it resets daily, it is not meant for long-term holding. Over time, the ETF is subject to decay due to contango in the futures market and daily compounding effects. For investors preparing for a potential crash, UVXY is best used tactically—during periods of rising uncertainty or when markets show signs of breaking down. It is a high-risk, high-reward instrument suitable only for experienced investors with disciplined risk management.
iPath S&P 500 VIX Short-Term Futures ETN (VXX)
For investors seeking volatility exposure without leverage, the iPath S&P 500 VIX Short-Term Futures ETN (VXX) offers a more moderate approach. VXX tracks the S&P 500 VIX Short-Term Futures Index, providing exposure to short-term VIX futures without magnification.
VXX tends to rise when fear enters the market and investors rush to hedge risk. It can act as a portfolio stabilizer during sudden selloffs, often offsetting losses in traditional equity positions. This makes it attractive for investors who want a defensive hedge rather than a speculative bet.
That said, VXX is not a long-term investment either. Like most VIX-based products, it suffers from roll costs and structural decay over time. Holding it during extended periods of low volatility can steadily erode returns. VXX is best used during periods of elevated risk—such as when markets are stretched, technical indicators weaken, or macroeconomic uncertainty increases. As part of a broader strategy, it can help protect capital when fear returns to the market.
ProShares VIX Short-Term Futures ETF (VIXY)
The ProShares VIX Short-Term Futures ETF (VIXY) provides long exposure to the S&P 500 VIX Short-Term Futures Index without leverage. It is structurally similar to VXX but is offered in ETF form rather than as an ETN, which may appeal to investors concerned about issuer risk.
VIXY measures the returns of a rolling portfolio of monthly VIX futures contracts with an average maturity of approximately one month. When equity markets decline sharply, volatility tends to spike as uncertainty increases. During those periods, VIXY can deliver strong gains and help cushion portfolio drawdowns.
Like other volatility ETFs, VIXY is not designed for buy-and-hold investors. The cost of rolling futures contracts can weigh on performance during calm markets. Still, for investors preparing for a possible downturn, VIXY offers a straightforward way to hedge equity exposure. It is often used as a short-term defensive position during periods when valuations appear stretched and downside risk is rising.
Conclusion: Preparing for a 1929 Market Crash Event
History doesn't repeat perfectly, but it often rhymes. The 1929 market crash, the dot-com bust, and the financial crisis all followed periods of extreme optimism, elevated valuations, and widespread complacency. Today's market shows many of the same characteristics.
Rather than assuming "this time is different," investors can prepare for a 1929 market crash event by incorporating volatility strategies into their portfolios. ETFs like UVXY, VXX, and VIXY are not replacements for long-term investments, but they can serve as tactical tools when risk rises. By planning ahead instead of reacting after a crash begins, investors can protect capital—and potentially profit—when markets once again remind us that no rally lasts forever.
