This September marks the five year anniversary of the 2008 financial crisis. While the US market and our overall economy continues to strengthen and improve, the financial downturn still weighs on investors’ minds. For example, low interest rates on savings accounts and tightened lending standards serve as constant reminders of the recent recession.
At Fort Pitt, our philosophy stresses that investors remain long-term oriented, but we understand that there are factors stemming from 2008 that impact current financial decisions. Below, we outline some changes fueled by 2008 and highlight strategies, where applicable, to consider that will help maintain monetary security.
Housing market impact and difficulty obtaining a mortgage. US bank lending is still 4 percent less than the day Lehman failed. While stricter regulations today create challenges for consumers to easily get a mortgage, we also see some owners with mortgages under water since housing prices have not fully recovered. Additionally – as I outline in a recent Pittsburgh Post-Gazette article that I was featured in on September 16 – mortgage companies still have the financial collapse on their mind, so they may go to extremes when it comes to ensuring that they are working with a qualified borrower.
Investor fear and behavior impacting decisions. Since the collapse, some investors have been taken advantage of, due to their fear of the markets. Some advisors prey on this fear and persuade investors into “guaranteed” or “safe” investments – such as annuities or gold. Also, we still find investors bailing out of the market and unsure of when to get back in. As an investor in today’s market, it’s vital to work with a trusted advisor and to stay educated and informed on an assortment of investment options.
Non-existent inflation amid rising costs. Since 2008, we have seen notable pockets of the economy become strained by rising costs – such as health care, food and sometimes energy. Unfortunately, these items can make up a substantial portion of a retiree’s budget, all of which can be impacted if the retiree cannot keep pace with the increase in expenses. Connect this with the fact that these investors tend to gravitate toward risk-sensitive investments (bond funds or stock funds), they often are vulnerable to short-term market volatility. In order to avoid becoming emotionally destructive and making shaky financial decisions, we urge investors have a sound discipline in place to guide them through these periods and stay on track to reach their goals.
As we reflect on the last five years and the changes that have been spurred by the crisis, it’s imperative to look forward and make solid, undeterred investment decisions that will secure your investment future.