Investment market update
It has been an eventful week in financial markets this week, with the US investment bank, Lehman Brothers forced to file for bankruptcy, Merrill Lynch agreed to being bought by the Bank of America to get them out of trouble and now the US Government stepping in with financial assistance to prevent AIG falling over. Many in the media are already calling the start of this week ‘Black Monday’, combined with another large fall overnight in US markets.
The US stockmarket index (S&P 500® Index) fell 4.71%, its largest one-day percentage loss since September 17, 2001 when the Index fell 4.92% following a four-day trading suspension. Ranked by magnitude of one-day losses for the S&P 500® Index, Monday’s decline ranks fourteenth among all trading sessions since January 1950. Although some market breaks are still fixed in our memory, others have faded from view. How many people can recall what the news background was when stock prices plunged on October 27, 1997; January 8, 1988; or September 11, 1986?
| Rank | Date |
S&P 500® |
Change vs. |
| 1 | October 19, 1987 |
224.84 |
-20.47% |
| 2 | October 26, 1987 |
227.67 |
-8.28% |
| 3 | October 27, 1997 |
876.99 |
-6.87% |
| 4 | August 31, 1998 |
957.28 |
-6.80% |
| 5 | January 8, 1988 |
243.40 |
-6.77% |
| 6 | May 28, 1962 |
55.50 |
-6.68% |
| 7 | September 26, 1955 |
42.61 |
-6.62% |
| 8 | October 13, 1989 |
333.65 |
-6.12% |
| 9 | April 14, 2000 |
1,356.56 |
-5.83% |
| 10 | June 26, 1950 |
18.11 |
-5.38% |
| 11 | October 16, 1987 |
282.70 |
-5.16% |
| 12 | September 17, 2001 |
1,038.77 |
-4.92% |
| 13 | September 11, 1986 |
235.18 |
-4.81% |
| 14 | September 15, 2008 |
1,192.70 |
-4.71% |
The S&P data are provided by Standard & Poor’s Index Services Group.
Take the emotion out of investing
We know from history that market economies are resilient and ride through tough market conditions. The rewards are there for the patient investor who takes the emotion out of investing, and takes into account rational considerations.
Your investments are being made for your life expectancy, to build wealth for your lifetime. As such, you will experience more market cycles like this in the future.
Many investors feel that they are on a roller coaster ride below, however it is worth remembering your longer term plan, and the reasons behind your investment strategy.
Financial strategy is different to investment strategy
Any financial strategies that are in place are separate to any investment decisions for your investment portfolio.
If you are salary sacrificing part of your income, or making personal superannuation contributions which will be claimed in your income tax return, this is a separate decision to investing those monies, and is one of the benefits of having a personal superannuation fund.
Accordingly, any financial strategy you have in place shouldn’t be impacted by the current market conditions. It would only be if you had a change in your personal situation, that we would consider changing your personal financial strategy.
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