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  • Writer's pictureGEO Strategic Partners

How the coronavirus market turmoil compares to 2008 – and what we can do

Source: World Economic Forum

  • The coronavirus outbreak is wreaking havoc on global financial markets.The 2008 recession can provide helpful insights and lessons.Strategies include government-led economic relief plans.

  • With the Dow having closed in bear market territory Wednesday, it’s worth looking at where the global economy is now compared to the last time it was in such turmoil.

  • The global financial crisis of 2008 was sparked by the implosion of the subprime mortgage market in the United States, which gradually became a contagion that spread to banks worldwide and led to a global economic downturn. Today, once more, the equity markets are facing a shock to the system – this time, an actual contagion: COVID-19.

Lessons from 2008

In the 2008 recession, for those with defined contribution savings plans and about to retire, the downturn in the market was especially painful. Taking the US as an example, the S&P 500 Index fell by 37% in 2008, and for long-tenured workers on the verge of retirement, their 401(k) account balances fell by more than 25% as a result, according to an analysis by EBRI. Defined benefit plans faced a double hit to their funded status, which is the key indicator of their health and is measured as pension assets divided by pension liability.

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