The Financial Lesson of 2008-09 That Most Investors Have Forgotten

If your memory minimizes how much you lost in the last bear market, you can easily overestimate how brave you will be in the next one

Like New Year’s Eve partyers leaving the old year behind, most investors have forgotten how much their stock portfolios lost during the global financial crisis.

Photo: Brian Harkin/Getty Images

香蕉视频苹果下载If 2000-2009 was the Lost Decade for investors, 2010-2019 was the Decade of Forgetting.

In March 2008, E.S. Browning wrote for The Wall Street Journal that “we may be in another lost decade香蕉视频苹果下载” for stocks, like the Great Depression and the 1970s. He was right. Stock investors had their wealth slashed in half twice, in 2000-02 and 2007-09. All told, the S&P 500 had an average annual total return of negative 0.95% from 2000 through 2009. To end the decade barely below where they had started, investors had to endure a brutal battering along the way.

香蕉视频苹果下载Financial markets tend to base their expectations of the future on the experiences of the recent past. , investors looking back on the prior decade saw that U.S. stocks had gone nowhere; value shares had outperformed growth; small stocks had done better than large; international stocks had beaten U.S. companies; emerging markets had earned higher returns than developed countries.

香蕉视频苹果下载At year-end 2009, most investors—individuals and professionals alike—expected interest rates to rise, inflation to return, the dollar to weaken, commodities to boom and U.S. stocks to struggle. The giant investment firm Pacific Investment Management Co. and its then-influential co-founder Bill Gross were actively promoting their scenario of “the new normal,” which they described as “likely to be a significantly lower-returning world” for stocks and bonds alike for years to come. (Mr. Gross left Pimco in 2014 and retired from money management earlier this year.)

Instead, over the ensuing 10 years, interest rates fell to historic lows, inflation all but vanished, the dollar strengthened, commodities languished香蕉视频苹果下载, and U.S. stocks earned among the highest returns they have produced in any decade. What’s more, bonds did well, growth stocks beat value, large stocks beat small, and shares from the rest of the world lagged far behind the U.S.

To Read the Full Story

Continue reading your article with
a WSJ membership