Global markets have experienced some of the wildest daily and hourly swings seen in recent history. In fact the last week of August presented us with two of the biggest daily swings in the last 5 years.
The volatility in the last week of August led some people to proclaim 2008 was happening again. One never knows but I do not think we are at that level of risk for several reasons. But there are undoubtedly many financial issues globally. From China's slowing economy to a crash in commodity prices. So called currency wars to a potential rate hike in the US. It is important to remember, however, that no matter what period of time you examine, there have always been economic worries, this is part of what makes markets. Without uncertainty everything would theoretically go up and up. It isn't possible.
As mentioned, there are a few key points to take into consideration when comparing today to the 2008 financial crisis...
In 2008, the fear of the entire global banking system collapsing was real. Every Friday we would read the latest reports of which banks were seized by the FDIC at the end of the day. Many corporations could not borrow money and were on the verge of not being able to operate on a daily basis. At present, banks have some of the highest level of cash on their balance sheets.
Corporate balance sheets are in great shape today and many companies are sitting on record levels of cash and fairly low overhead. In 2008 many companies were overly optimistic and assumed the good times would never end. This led companies to take on additional risk and increase their debt. Once the credit markets froze, they were caught with too much overhead and little cash.
Lastly, we believe global economic expansion is fairly strong. To say the global economy is in great shape is an overstatement in our opinion. But it has been showing signs of improvement and growth. This doesn't mean there won't be a slow down during this recovery. There have been plenty of slowdowns within recoveries over the years. The economic cycle isn't exact nor is each cycle exactly like previous cycles. 2008 is sometimes called the "Great Recession" for a reason It was a deep recession. Most recessions are no where near as bad.
As much as we don't see signs of 2008 in the global economy it certainly doesn't mean things are great right now. We think we will continue to see heightened volatility. The best thing to do is make sure your investment plan is still aligned with your values and goals. Make sure the risk is something you are still comfortable with and rebalance when necessary.