10 Yrs On Does 2017 Look Like 2007 Credit Crunch

Published / Last Updated on 12/10/2017

Credit Crunch10 Yrs On Does 2017 Look Like 2007 Credit Crunch.

Can you afford to lose half of your money?

This month both the UK financial regulator, the Financial Conduct Authority (FCA), the International Monetary Fund (IMF) and the outgoing German Finance Minister have also issued warnings about unsustainable levels of debt and the high risk of economic crash.

These warnings appear to be largely IGNORED by many Governments and Central Banks.  Just like they did in 2007.

The FCA has even written to all UK banks demanding written confirmation for what each bank’s contingency plan is and for them to bolster bank reserves against another collapse.  So we decided to look at what happened 10 years ago to try and second guess the future.

10 years Ago

October 2007, exactly 10 years ago, FTSE 100 hit near record highs of 6,752. 

October 2008 (1 year later) FTSE 100 was at 4,377. 

March 2009 (another 4 months later) FTSE 100 was at the 3,512.  

A staggering sustained fall of 48% in 15 months.  The so called ‘Credit Crunch Crisis’.

Today 2017: Warnings from all over the World.  US debt, China debt, Japanese Debt, European debt.  Banks and regulators seemingly not doing anything to prevent history repeating itself.

We repeat:  Can you afford to lose half of your money?

We also decided to look at which investment sectors faired the worst from 01/10/2007 to 30/09/2007 (exactly 10 years ago).  Using the Investment Association (IA) fund sector classifications, we found the following average 1 year performance within each IA sector:

IA Sector Performance 01/10/2007 to 30/09/2007

  • IA SECTOR Asia Pacific Excluding Japan -31.15%
  • IA SECTOR Asia Pacific Including Japan -21.23%
  • IA SECTOR China/Greater China -35.89%
  • IA SECTOR Europe Excluding UK -21.95%
  • IA SECTOR Europe Including UK -21.91%
  • IA SECTOR European Smaller Companies -28.10%
  • IA SECTOR Flexible Investment -18.82%
  • IA SECTOR Global -19.30%
  • IA SECTOR Global Bonds +7.67%
  • IA SECTOR Global Emerging Markets -25.43%
  • IA SECTOR Global Emerging Markets Bond +9.84%
  • IA SECTOR Global Equity Income -19.00%
  • IA SECTOR Japan -18.42%
  • IA SECTOR Japanese Smaller Companies -27.01%
  • IA SECTOR Mixed Investment 0-35% Shares -8.87%
  • IA SECTOR Mixed Investment 20-60% Shares -11.35%
  • IA SECTOR Mixed Investment 40-85% Shares -16.19%
  • IA SECTOR Money Market +3.53%
  • IA SECTOR North America -16.35%
  • IA SECTOR North American Smaller Companies -11.09%
  • IA SECTOR Personal Pensions -12.52%
  • IA SECTOR Property -24.39%
  • IA SECTOR Protected -7.16%
  • IA SECTOR Short Term Money Market +4.40%
  • IA SECTOR Specialist -18.38%
  • IA SECTOR Sterling Corporate Bond -6.31%
  • IA SECTOR Sterling High Yield -9.02%
  • IA SECTOR Sterling Strategic Bond -6.76%
  • IA SECTOR Targeted Absolute Return -1.72%
  • IA SECTOR Technology & Telecommunications -19.97%
  • IA SECTOR UK All Companies -24.01%
  • IA SECTOR UK Equity & Bond Income -18.00%
  • IA SECTOR UK Equity Income -23.49%
  • IA SECTOR UK Gilts +5.91%
  • IA SECTOR UK Index Linked Gilts +9.63%
  • IA SECTOR UK Smaller Companies -29.16%
  • IA SECTOR Unclassified -13.11%
  • IA SECTOR Volatility Managed -18.25%

Conclusion

Only a few winners up there and interestingly, gold, silver, platinum and other metals were in general up around 20-30% during that same period.  So at least we know which sectors faired 'for better or worse' in the last crisis.

The economy today is different to that of 10 years ago, the debt may be in a different place now, but is it still debt, it is still there, it is at record levels and governments have let it grow to artificially support and stimulate economies and it is inevitable that bubbles always burst, it is just a case of when.

This is perhaps why we are not personally invested in UK and US equities at present,  we are prepared to and have already missed out on gains and indeed are losing money on our cash funds (inflation devaluing) waiting for a longer term opportunity but that is our choice.  We just thought it was interesting to review 10 years on.


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