10 Years After the Global Financial Crisis

10/12/2018
Provided by Mercer.
 10 Years After the Global Financial Crisis - 10 Lessons to Learn


 
September marked the 10th anniversary of the collapse of Lehman Brothers, the fourth largest investment bank in the US, and its impact on the world’s investment markets. Ten years on, now is a good opportunity to look back and ask ourselves what, if anything, have we learned from living through those exceptional times. While new lessons to be learned may be few, there are some valuable older lessons to be reinforced.
The crisis
Lesson 1: Market cycles are inevitable
Lesson 2: The financial system is based on confidence, not numbers
Lesson 3: Managing and controlling risk is nearly impossible
The reaction   
Lesson 4: Don't panic!
Lesson 5: Some banks are too big to be allowed to fail
The aftermath     
Lesson 6: Emergency and extraordinary policies work!
Lesson 7: If massive amounts of money are being pumped into the financial system, asset prices will surely rise
Lesson 8: If short-term rates are kept at extraordinarily low levels for a long period, returns on other assets will eventually fail/fall in sympathy
Lesson 9: Extraordinary and untried policies have unexpected outcomes
Lesson 10: Markets don’t always conform to expectations
Thoughts from a peek into the future  
Thought 1: The next crisis will be different from the last – they always are
Thought 2: Don't depend on regulators preventing future crises
Thought 3: The outlook for monetary policy is unknown
So what now?  
Action 1: Don't abandon diversification. The Scheme’s funds are diversified across multiple assets
Action 2: Be dynamic! This simply means being ready for change, but unless your circumstances alter sometimes doing nothing is the best action
  This information has been prepared by Mercer (N.Z.) Limited for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a financial adviser before making any investment decision.
 
 

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