STOCK MARKET CRASH part one
At breakfast one day last week, a friend and I were having a discussion about the economy and it's prospects. The subject of the 2008 stock market crash came up. My friend called it a sudden and quick drop in market value, while I remembered it as a longer period. Everyone who had money in the market at that time will remember the outcome. At one point, money invested in the market or saved in a 401K was lost to the tune of about 40%. That's hard to take if that's where you had most of your life savings. Well, here's the story. I'll use the S&P 500 index (it's an average of 500 prominent stocks) as a guide as most analysts do. I'm disregarding cents for clarity.
The year 2007 started with the S&P 500 valued at $1,418 and it ended at $1,468. That's as flat a line as you will get for a year; it was a very slight increase in value. That's not great. Maybe some worrying was going on.
From that point, 2008 began with January ending at $1,379; February at $1,331; March at $1,323; April at $1,386; and May at $1,400. None of these were significant drops or raises and we were almost back up to the point where we started the year. In the later part of June, the first real hit occured and the index finished at $1,280. July saw a moderate decline with the index finishing at $1,257. In August, we had a modest increase to $1,283. In September we knew we were in trouble; the index finished at $1,166. October continued the decline and finished to $969. In November, people were talking about suicide; it hit a low point ot $741 and ended a little higher at $896. December brought a modest increase to $903.
As you can see, that index says the stock market dropped almost 50% from the beginning of 2008 to that low point in November. If you had $1,000 spread out over various stocks in the market at the start of the year, chances are you owned only a little over $500 by year's end. It was pretty devistating for those of us nearing retirement to see our "nest egg" get blown away so quickly.
If you think that's the end of the story, tune in again tomorrow.