Stocks are falling: Is this the same as 2008 recession?
September 30, 2011
This feels like deja vu.
Markets fluctuating wildly due to rumors of another global recession, stock prices freefalling in unprecedented levels, wary investors holding on to paper losses while hoping everything will be all right — this looks like 2007-2008 all over again.
We know what it was like before. Prior to 2007, almost everyone was happy with the stock market. In 2006, the benchmark Philippine Stock Exchange index (PSEi) grew by an amazing 42.3%. When 2007 started, optimism reached new levels with most people joining the stock market bandwagon. Unfortunately by then the subprime mortgage crisis has already started which caused 2007 to end with tempered gains of 21.4%. (See 2007 PSE stock market performance)
Little did everyone know it was going to be downhill from there.
The same problems in 2008?
By 2008, the optimism seen during preceding years was replaced by gloom and uncertainty. In the PMT Forum, members started asking: Who is hurting during this downturn?
They compared notes about their losses: How much have you lost so far in this bear market?
Member mlangseth, for example, shared on October 2008: “I have lost 28-33% of my investments, paper loss only as I do not want to move any of my investments.”
And member poorguy too, that same month: “I think I lost 20-25% or more pa ata, paper loss lang naman. But from other investments I lost php 100k na…”
Stock market woes forced scout to change investing strategy: “I managed to pull out around 30% of my stocks investment, the other 70% was just too deep to cut losses. My original plan is for short term investment, say 6 months to a year. Unfortunately I am forced to go long term now.”
History repeating itself in 2011?
The eerie reality is that the same events are currently happening and investors are asking the same questions people were asking back in 2008.
Look at one discussion recently posted in the PMT Forum: How much did you lose last week?
Says adomicbomb on September 2011: “I don’t know if you check your portfolios everyday, but chances are you’re also deeply in red. Last week was terrible virtually all funds lost 10-15% of their value in a couple of days.”
And another one that seems to echo what investors were thinking in 2008: PSE: Is it time to liquidate?
Looking at these current thoughts and posts, we wonder: is history repeating itself?
What’s going to happen next?
The PMT Forum again saw a surge in active members dissecting the current issues plaguing global markets.
Shares dinaren: “I’ve also read that some European banks are in trouble, Italy is showing signs of crisis and could possibly go into default. Italy is just too big to fail they say. Expect a mad rush to the exits when this happens. Nothing we can do about it. Even the fundamentally superior companies will succumb to market sentiment.”
Greedisbad opines: “The whole debt crisis reminds me of the bank bailouts done by the US a few years ago. It’s basically a lose-lose situation. If they let Greece default, the European Union’s Greek T-bills will be severely marked down and recession is a guarantee. If they bail Greece out, then at the very least they could try to sort Greece back to being economically viable again.”
For allanmm13: “The imminent fall of US/Europe may signal the rise of Emerging Asia (including sana ang Pilipinas). There will be a period of adjustment like tightening of policy, reforms from countries about their banking,etc. It will be probably the shifting of economic power from West going to East.”
What to do next?
Without a doubt, we are faced with tough and uncertain times. The market could suffer a deja vu and crawl back into recession just like what happened during 2007-2008. Or it could be resilient enough to emerge less scathed. The sad fact, though, is that no one knows what’s going to happen next.
The best weapon to use to protect oneself, therefore, is knowledge and understanding of the market. We encourage everyone to read, conduct research, and join discussions before making a decision. Do not rely on one person’s opinion alone. Read and learn while taking everyone’s suggestions with a grain of salt. At the end of the day, you can only depend on yourself. And for whatever’s gonna happen to you or your investment portfolio, you only have yourself to blame.
Here’s to hoping we all emerge triumphant when these dark, trying times end.