This is a concern I saw expressed recently online by a new investor. In theory it could happen, but in practice it cannot. In practice, the stock market has steadily increased by well over 6% a year when measured averaged over decades.
The stock market is not a zero-sum game, like gambling. The stock increases in value over time because the underlying businesses are profitable and the value of those businesses increases over time. Fair market value for a stock is a function of the business’ net assets (assets minus debt) and all its future profits. Due to market sentiment (investor fear or investor greed) stocks often trade above or below their fair market value. However, on average over time, they trade at fair market value.
During an economic crisis, such as COVID-19 in 2020, the stock market can drop suddenly as investors suddenly panic on worries about businesses no longer being as profitable and about potential bankruptcies. Yes, some of that did occur during COVID-19 in 2020. However, most businesses trading on the stock market were able to adapt and return to profitability. Even though the US stock market dropped by close to 40% in a day or two, it fully recovered and went higher as those businesses adapted to COVID-19.
What would it actually take for the stock market to go to zero? An economic crisis much much worse than COVID-19 — so bad that it prevents the business environment from ever recovering and bankrupts all (not just some) companies. Perhaps a massive meteor strike, or more likely the extinction of the human race.