Access our news and insights

Stay up to date with the latest views and analysis from the team.

Lonsec Research   ⟩   News & Insights   ⟩   Media releases   ⟩   How does a crisis really affect markets?
Veronica Klaus

AuthorVeronica Klaus

TitleHead of Investment Consulting

DateOctober 15, 2018

CategoryMedia releases, News

Share

Investors are constantly warned of an impending crisis in financial markets with the resultant damage to asset prices. Yet while a crisis can have a severe impact on markets, investors who avoid herd-like selling can often ride out the slumps. For active and contrarian fund managers, such periods of disruption can also present opportunities.

The below chart reveals the impact on financial markets of eight memorable political and market crises over the last twenty years. The chart shows the impact each event had on the performance of US shares, measured by the Dow Jones Industrial Average, on the day of the crisis and over the subsequent 150 trading days.

Dow Jones Industrial Index performance following a crisis


Source: Lonsec, Bloomberg, FE

In all but one case—the Global Financial Crisis which began in 2008—the Dow Jones had rebounded by the 150-day mark and in many instances had produced gains that exceeded the initial loss. Lonsec does not recommend a strategy that seeks to time the market but the analysis highlights that in general major crises have an only short-term impact on markets.

Release ends

For more information contact:

Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au

Related stories

15 Nov 2018 - Financial advisers are now able to access investment research, encompassing clients’ whole of life needs, with the announcement by Lonsec of the inclusion of ...

Understanding super no longer optional for advisers

By Libby Newman Read now

24 Sep 2018 - Emerging market returns have been a cause for concern over recent weeks but by taking a broader perspective, investors may be able to take advantage of the ...

Emerging markets offer opportunity, if you can sustain the ride

By Libby Newman Read now

12 Sep 2018 - Exchange Traded Funds (ETFs) have become a popular way for investors to gain exposure not only to passive indices but to a range of market factors. Smart ...

Not all income is created equal

By Peter Green Read now