Reflections on the Great Financial Crisis: 16 Years Later, Lessons Still Relevant Today

Reflections on the Great Financial Crisis: 16 Years Later, Lessons Still Relevant Today

Dustin Terry |
Categories
Planning

This week’s insight reflects on the events of September 2008 and what we can still learn about the Great Financial Crisis (GFC) today.

It was 16 years ago this week when investors went from navigating through a garden-variety market decline to fearing the worst. On September 15, 2008, Lehman Brothers, the famed Wall Street investment bank, filed for Chapter 11 bankruptcy. It sent shockwaves through the global financial system, leading to extreme daily stock market declines and a furthering of the bear market that began in October of 2007.

Lehman’s collapse came just six months after regulators coordinated a breakup of fellow bank, Bear Stearns, and it was seen as the government allowing a major institution to go under with little assistance, increasing economy-wide risks. At the same time, insurance giant AIG nearly went bust too. The S&P 500 went on to plunge in the next seven weeks.

Fast forward to September 2024, and we all know how things turned out. The GFC was tumultuous, but markets and the economy recovered. Today, household net worth is at record highs near $170 trillion, up from a 2009 low of $60 trillion. We’ve dealt with market corrections, bear markets, and a historic inflation spike since then. Through it all, investors focused on the long haul have done well investing steadfastly month by month.  

Ahead of the election, it’s important to remind ourselves that there will always be new reasons to worry. What’s more, if you are like so many Americans with more financial assets and responsibility today versus September 2008, chances are you feel like there is more to lose now if another GFC-type event transpires. Just remember that there will be prolonged volatility at some points (nobody knows when), but a strong financial plan helps buffer against personal money turmoil.  

Here’s another way to think about the 16th anniversary of the start of the GFC: it was also the beginning of one of the greatest bull markets of all time. Investors had the brief opportunity to buy the S&P 500 at levels so cheap that returns through today are near 1,000%.