Ten years ago markets were looking expensive and a correction seemed due. How times have changed.
Well not exactly. A lot has actually changed over the past ten years but markets have ended up in a somewhat similar place to where they were following a long bull run, certainly on the equities side.
Hopefully, not on the credit side.
While not every lesson from the financial crisis has been comprehensively learnt we are in a better position to withstand a downturn than we were in 2007, particularly in terms of the banks, which have been forced to stash away cash reserves for a rainy day in a way that they weren’t before.
Customers queue up to withdraw their money from Northern Rock in 2007.
That’s not to say another financial crisis can be ruled out, and it will never be possible to do so, but if there is to be one again at some point it will take a different form to the 2007 and 2008 version.
While people are quick to hail the ten year anniversary of pretty much anything, it is a bit of a stretch in this case.
The financial car started skidding in 2007 when US sub-prime lender New Century Financial filed for bankruptcy in April and there was a run on Britain’s Northern Rock in September, but didn’t really come off the road until the summer of 2008 when events culminated in the collapse of US bank Lehman Brothers.
In this instance, the ten year anniversary of the credit crunch being discussed this week refers to 9 August, 2007, a day when French giant BNP Paribas shuttered some of its funds related to sub-prime mortgages, the ECB injected €95bn into the markets, while the US Fed also added temporary reserves.
Short of any particular day that marked the start of the credit crunch, the financial world has since decided this one will do.
Notwithstanding this, whichever starting point you think is most appropriate it is true to say the crisis also represented one of the best buying opportunities for investors we have seen in history.