InvestmentsAug 7 2017

Ten big trends a decade on from the global financial crisis

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Ten big trends a decade on from the global financial crisis
ByHannah Smith

Ten years since the financial crisis, what has changed and where are we now?

Back in August 2007, BNP Paribas suspended three funds because of problems in the US subprime mortgage sector, something investors had not much considered until it was revealed as the lynchpin of an unfolding crisis.

Less than a month later, there was a run on Northern Rock after the bank asked the Bank of England for a bailout.

A decade on from the global financial crisis, marked as the day in September 2007 when there was a run on Northern Rock, the financial landscape has changed dramatically.

Research from Fidelity International has highlighted 10 notable trends in the investing and personal finance.

Best performing assets since the crisis

The best performing asset class over the last 10 years has been high yield bonds, with a return of 217 per cent. Emerging market debt and US equities complete the top three best performers. At the bottom of the chart is commodities, down 21 per cent, cash, returning 17 per cent, and UK equities, up 68 per cent over the decade.  

Tom Stevenson, investment director for personal investing at Fidelity International, said: “The analysis of the returns of the various asset classes over the past ten years throws up some interesting findings.

"For example, and somewhat surprisingly, the cumulative returns of high yield bonds and emerging markets over the past decade have pipped US equities.

"Bonds have benefited from the collapse in interest rates in the wake of the financial crisis but without first suffering the savage bear market that equities experienced in 2008 and the start of 2009.”

Cash vs. stock markets

With interest rates so low for so long, and inflation ever present, it is no surprise that the difference in returns on cash versus equities has been striking.

A £10,000 pot of cash would be worth £10,460 ten years on from the financial crisis, while the same amount invested in the FTSE All Share would have returned £16,846.

This is despite the dramatic stock market crash in late 2008, the eurozone crisis and several political risk events of the past ten years.

UK sectors performance

A comparison of sector performance in the UK market over the last decade reveals a large dispersion of returns.

Of the MSCI sectors, IT was the standout performer, delivering 281 per cent, followed by consumer staples, up 184 per cent. UK financials, on the other hand, booked a loss of 13 per cent over the period, and materials made only a small gain of 3.5 per cent.

Mr Stevenson said: “The dispersion of returns over the past ten years makes another strong case for holding a well-diversified portfolio.