THE END OF THE WORLD

October 2, 2018

~ TEN YEARS LATER ~


Forgive me for the drama – but as an financial advisor, I recallSept, 2008 very clearly and during that time and the following year we were in a period few investors and advisors ever experience. It was, in a single word, terrifying. Now, 10 years later, it’s additional proof. Proof markets recover, proof that faith in the market is appropriate.

The US Standard & Poors 500-Stock index closed at 1,251.70 on Friday, Sept 12th, 2008. It was down 20% from its all-time high of approximately 1 year earlier and over the next few months things really got nasty.

On the following Sunday night, attorneys for Lehman Brothers filed what continues to be the largest bankruptcy petition in US history. Lehman Brothers was a 150 year old investment bank and brokerage house had failed with $600B in assets. Later that week the global insurance company AIG failed and was bailed out by the US government with $182Billion.

In just a few days the global credit market stopped functioning and the resulting Great Recession was the longest since the end of the Second World War. The US equity market finally bottomed on March of 2009 with the S&P 500 index down 57% from its October 2007 peak.

In many ways Canada was spared the worst of the crisis as no bank failed and only the CIBC got caught in the mortgage fiasco the US banks defaulted on. The TSX peaked on Apr 21st, 2008 closing at 14,266 and was at 11,752 at the end of Sept, You may be surprised to know that 10 years later the economy of the US is booming and Canada doing nicely. Unemployment is the lowest in decades

2008 and hit 8,596 on March 30th. This represented a 39% decline from the peak of the Canadian market, almost a year earlier., labour shortages are in fact beginning along with capacity constraints.

Our friend Nick Murray does a great job of describing this period, where we are today and what the patient investor has learned.