A Client Asks, "What's the Worst Case Scenario?"

A miserable start to the New Year, with US stocks down 7.9% in January, European markets down 7.4-11.4%, and Japan down 10.9%. 

 

The biggest declines are in Shanghai down 17.7% YTD and down 43.7% from an all-time high.  Clients are obviously concerned and want to know if we should expect a repeat of the 2008-9 bear market. Let's start that conversation by looking at the last ten years of S&P 500 activity:

Significant dates include:

  • October 2007 - S&P 500 makes all time high on back of "robust" housing market
  • March 2008 - Bear Stearns fails - stocks sell off but recover mid-summer
  • September 2008 - Lehman Brothers fails - stocks sell off violently, declining peak to trough by 57.7%
  • April 2010 - Greece hits the wall, threatens to exit the Euro
  • July 2011 - Greece hits the wall a second time
  • September 2012 - Spain, Italy and Portugal have trouble servicing debt
  • April 2013 - S&P 500 sets new all time record, goes on to rise 32% for the year
  • October 2014 - stocks fall 9.9% on fears of European slow down, Ebola, but set new records by November 2014
  • August 2015 - stocks correct 12.5% from May record level on fears of China slowdown
  • November 2015 - stocks rally to within 0.9% of a new high.
  • January 2016, -stocks correct 11% from the November high water mark as China, falling oil prices dominate the news.

Read the entire commentary here.