Investors are having a hard time trying to put the stock market and the economic performance of 2020 into perspective. Hence, I dug up the timeline of the 2008 financial crisis, with stock market performance at key points to help put things into perspective.
There were early signs that the housing industry had something brewing in 2007. Here is a rough timeline of events in 2007.
S&P500 was at 1292 on August 12, 2008, 1255 on Sep 19 and reached 899 on Oct 10, 2008. Market bottom was 756 on Mar 13, which was still 5 months away.
In February 2009, Congress came with another 787billion package called the American recovery and reinvestment act. The Dow dropped to its lowest in March and unemployment reached its peak 10% in Oct 2009. As you can see, by the time the worst unemployment numbers came in, stock market was already of the lows.
There were early signs that the housing industry had something brewing in 2007. Here is a rough timeline of events in 2007.
- Feb 2007 : Homesales peaked
- Feb 2007 : Greenspan warns of recession, but FED ignores it
- March 2007 : The subprime lending industry is hammered and hedge funds and investment banks feel the pain
- March 2007 : Stocks plummet on subprime woes, Dow plummets 242 points
- June 2007 : Homesales forecast revised down
- Aug 2007: Fed lowers rate to 4.75%
- Oct 2007 : Homesales prices further tumbled in October
- Nov 2007 : Treasury creates 75billion superfund to help institutions having exposure to Mortgage backed securities
- Dec 2007 : Lowering the Fed rate wasnt enough. Banks were too afraid to lend. Fed announces TAF, no bank wanted to get caught with bad debt on their books
- Dec 2007 : Foreclosure rates double, 75% more foreclosures in 2007.
- Dec 2007 : By this time Fed lowered rates two more times and rate was 4.25%
All the above commentary, as scary as it looks, are all from 2007. There were clear warnings that the crisis was cooking, but no clear measures were taken.
S&P500 was at 1410 on Jan 12, 2007. The peak was at 1552 on July 13, 2007. It was at 1411 on Jan 4, 2008, effectively closing 2007 flat. It was at 1425 on May 16, 2008. The 2008 story follows to put the May 16, 2008 price into perspective.
- January 2008 - Feb lowered rate to 3.5%, 57% more foreclosures than 12 months earlier, January existing home sales fell to its lowest level in 10 years(slipped 23.4%)
- Feb 2008 : Economic stimulus act of 2008 worth $152 billion, Feb home sales fell 24%, foreclosures up 60%
- Mar 2008 : Fed trying to buy time
- Apr - June 2008 : Fed lowers rates and buys more toxic debt
- July 2008 : IndyMac bank fails, talks of Fannie Mae and Freddy Mac bailout as these two hold more than half of 12 trillion US mortgages, Congress approves housing and recovery act
- Sep 2008 : Fannie and Freddie are nationalized, Lehman brothers bankruptcy trigger global panic. This was the point when the world realized that an unregulated industry like investment banking couldnt function without government intervention, money market funds broke the buck, Fed insures money market accounts, Washington mutual bank goes bankrupt
- Oct 2008 : Emergency economic stabilization act of 700 billion, 1.7 trillion commercial loans program, stock markets sell off despite co-ordinated central bank action
- December 2008 : TARP, Big 3 bailout, zero interest rates
S&P500 was at 1292 on August 12, 2008, 1255 on Sep 19 and reached 899 on Oct 10, 2008. Market bottom was 756 on Mar 13, which was still 5 months away.
In February 2009, Congress came with another 787billion package called the American recovery and reinvestment act. The Dow dropped to its lowest in March and unemployment reached its peak 10% in Oct 2009. As you can see, by the time the worst unemployment numbers came in, stock market was already of the lows.
https://awealthofcommonsense.com/2020/03/a-short-history-of-dead-cat-bounces/
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