After the Financial Crisis

Today’s market action is influenced, in a large part, by another Global financial stock with a misstep by management (Deutsche Bank - Large German Bank). It was just over 8 years ago when the infamous financial crisis of 2008 occurred.  On Sept 15, 2008, the historic US-based investment bank, Lehman Brothers, collapsed.  The company was riddled with margin calls from counterparties, huge mortgage debt exposures, inadequate liquidity, and had no bailout from the government or rest of the industry.  Fast forward 8 years, and what has happened since then? The world has become a bit more expensive.

Of the 500 stocks listed in the S&P 500 index on September 15th, 2008, as of recently, almost a fifth are no longer represented, with a total of 406 still trading.  The S&P 500 index has appreciated about 10% a year on a compound basis. After 8 years of appreciation at 10% annually, it must be time to buy! Right MIKE!

BUT WAIT there’s a huge skew in the returns between the stocks that make up the index. Below we present some of the best and worst performers still trading today, with both total and annualised total returns.

We have outlined a couple interesting observations below:

Despite the horrific trading conditions for banks and financial companies during the crisis, none of the financial stocks currently trading fall into the worst column (although some are no longer in existence).

The balance of the names that are the leaders are concentrated in 4 sectors: Consumer Discretionary, Consumer Staples, Tech, and Health Care. 

The balance of names in the loser category are concentrated in commodities: energy and materials dominate the stocks that reside in this list. We highlighted Avon with pink – maybe we are all becoming just a bit more comfortable with our own looks? 

Source: Bloomberg & VIP Wealth Solutions

But what about today? Some dogs have become a star again. In the negative space, a large percentage of the destruction was done in the energy space. However, this year energy is one of the leaders along with gold.

So what about tomorrow? For those of you who have followed along on the blogs, we have been bullish on energy since the early part of the year. There may be more fireworks to come in this space as it appears OPEC is trying to cooperate. We remain committed to not getting bit by this market. So to speak…

 

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