Sept. 7, 2008: The government seizes control of Freddie Mac and Fannie Mae, which guaranteed millions of bad loans. Sept. 15, 2008: Lehman Brothers goes bankrupt under the weight of $619 billion in debt, much of it due to investments in subprime mortgages.
What Caused the Financial Crisis of 2008? The growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of "toxic" assets, the collapse of home prices, and more contributed to the financial crisis of 2008.
On October 24, 2008, many of the world's stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices. In the U.S., the DJIA fell 3.6%, although not as much as other markets.
2008: In response to the housing bubble and subprime mortgage crisis, the S&P 500 lost nearly half its value and took two years to recover.
The bear market was confirmed in June 2008 when the Dow Jones Industrial Average (DJIA) had fallen 20% from its October 11, 2007 high. This followed the bull market of 2002–07 and was followed by the bull market of 2009–2020.
Australia's housing prices have experienced the largest decline in a calendar year since the global financial crisis (GFC) in 2008, when home values fell 6.4 per cent nationally.
Steven Spielberg and Jeffrey Katzenberg both are reported to have lost from the funds. So did banks HSBC and Royal Bank of Scotland. Tufts University has written off a $20 million investment with Madoff, and Yeshiva University is another reported victim.
The bottom line
Signs point to a recession in 2023, not just in the U.S. but globally, though many experts remain hopeful it will not be too severe. This is good news for everyone, as it could mean fewer people lose their jobs, and household financial impacts will be mild.
On Monday, Oct. 19, 1987, the Dow Jones Industrial Average plunged almost 22%. Black Monday, as the day is now known, marks the biggest single-day decline in stock market history.
"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.
Do you lose all the money if the stock market crashes? No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.
Nouriel Roubini recommends staying away from long duration bonds. Economist Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly" recession in the US and globally occurring at the end of 2022 that could last all of 2023 and a sharp correction in the S&P 500.
To wrap it up, though the world might witness pecuniary problems in the coming years, probably because recession is a part and parcel in an economic cycle, the great financial crisis of 2008 was a phenomenon in itself and is most likely not going to occur again.
On the other side of the equation, three of the worst-performing stocks in the S&P 500 in 2008 were American International Group Inc (NYSE: AIG), XL Group plc (NYSE: XL) and Genworth Financial Inc (NYSE: GNW), each of which declined between 88 and 97 percent in 2008.
Compared to the Great Depression where stock market fell 90% over a period of almost four years, the 2008 crash only took 18 months.
ITR Economics is forecasting that a macroeconomic recession will begin in late 2023 and persist throughout 2024. Business leaders recently had to lead their companies through the recession during the COVID-19 pandemic, and some were even in leadership positions back in 2008, during the Great Recession.
As shown in the table below, the recovery period for U.S. stocks has been as long as 15 years: In the wake of the 1929 Crash, the IA SBBI US Large Stock Index didn't fully recover until late 1944. For gold bugs, the longest recovery period spanned more than 26 years (from October 1980 until April 2007).
Looking ahead to second-quarter reports, analysts are calling for S&P 500 earnings to fall 6.4% compared to a year ago. Fortunately, analysts are projecting S&P 500 earnings growth will rebound back into positive territory in the second half of 2023.
Australia is moving closer towards a recession and its chances of experiencing one in the next year is sitting at around 50 per cent, according to economists.
According to the definition of a "technical recession," we're still a while away from recording a recession this year (if at all).
Many economists and investors had a clear narrative coming into 2023: The Federal Reserve had spent months pushing borrowing costs rapidly higher in a bid to tame inflation, and those moves were expected to slow growth and the labor market so much that the economy would be at risk of plunging into a downturn.
Lehman Brothers went bankrupt. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester all came within a whisker of doing so and had to be rescued.
Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.