It does take those risks into account and I tested it on 2006-2008 previously. However, there is little point in testing a collapse with the same model. If the stock market collapses anyone investing would be out of luck. Your standard models won’t be able to track that, because it’s usually something like a “black swan” event[1].
Instead you’d want some sort of meta model. In either case. I’m getting 100% YoY returns when I augment my model, in real life. I think even a 50% loss one year wouldn’t be the end of the world.