A lot has changed in the 10 years since the credit crunch back in 2007. However, it has been suggested that, when talking about equities, markets aren’t too different from how they were then.
On 9th August 2007, BNP Paribas announced that they were closing two of their hedge funds. This is widely acknowledged as the start of the credit crunch, but there were many events before this that showed signs of danger. For example, New Century Financial, a US sub-prime lender, filed for bankruptcy in April.
Another financial crisis isn’t to be ruled out completely, but it’s good to know that thanks to lessons learnt from 2007, we’re in a much better position to deal with a downturn.
The financial crisis did, however, represent a huge buying opportunity for investors. Fidelity International have released information regarding various asset classes and have reported that all but commodities have gained considerably in the 10 years since the crisis. They also mentioned that two of the biggest gainers were homeowners and stock market investors.
However, thanks to reduced interest rates, bonds have also benefited from this 10-year period. As bond prices move in the opposite direction to yields, these have done well in this time period.
Tom Stevenson of Fidelity added that “bonds have benefited from the collapse in interest rates” during the financial crisis. He also added that this was without “suffering the savage bear market that equities experienced in 2008 and the start of 2009.”
According to Stevenson, “the challenge now is deciding where markets will head in the next ten years”.
“While the recent impressive corporate earnings season (profits up by around 10% in America) goes some way to justifying the markets’ new highs, the bull market is now increasingly long in the tooth.”
It will be difficult to predict what the next 10 years will bring for investors. If you’re looking for financial advice regarding investing, talk to our team. Please call on 01926 492406 or email us at email@example.com to make an appointment.