Markets aren’t always quick to react
Bear Stearns, the US investment bank that was the first domino to fall in the GFC, was promised a bailout by the New York Fed on March 14, 2008. Within the next week, the Fed pulled the offer, and the firm collapsed. In hindsight, it should be obvious that this was a great time to sell everything and get out of the market… Or was it? In the two months following the collapse, the S&P 500 rallied ~10%! In fact, even after Lehman Brothers collapsed on September 15th, the market continued to hold up until the 29th of September, when in fell nearly 9% in one day. Could the ‘Brexit’ vote be a ‘Bear Sterns Moment’, rather than a ‘Lehman Moment’, as described in late-June? Only time will tell, but it’s worth noting that the FTSE has rallied a bit over 10% in the three weeks since the vote. (Image credit: Livewire, FactSet)
Patrick was one of Livewire’s first employees, joining in 2015 after nearly a decade working in insurance, superannuation, and retail banking. He is passionate about investing, with a particular interest in Australian small-caps.
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Comments
James Marlay
Most of the commentary I've read suggests there is less concern about the 'health' of the financial sector, but definitely worth keeping in mind...
Patrick Poke
Very true James, and the last 5 years have been a very different market than the years leading up to the GFC. It's worth remembering Chad's comment (was it a quote?) that bull markets are born in pessimism, grow in skepticism, mature in optimism, and die in elation... There's definitely two very different stories being told about markets, I wouldn't claim to have the foreknowledge to see which is correct.