One can spin it any which way. However, there is no longer anything good to say about the stock market‘s performance in 2008. After the previous year when already the US credit crisis became the market‘s defining feature, the pessimists took over completely in 2008. Falling real estate prices and an increase in the expected number of defaults in the socalled sub-prime sector resulted in trading with structured mortgage products coming to a standstill across the board. This in turn essentially ripped out the commercial basis of the major American investment banks. In March, Bear Stearns could only be saved with audacious measures. In summer, mortgage lenders Fannie Mae and Freddie Mac were sucked into the crisis and had to be completely nationalised. Next in September Lehman Brothers declared bankruptcy and started a chain reaction that dragged down the entire banking sector. State and national central banks were forced to use all conceivable financial instruments to prevent the worst from happening.
In the red, dark red
One cannot rule out the possibility that the financial crisis will increasingly affect the US real economy in the coming year. Moreover, the crisis has continued to expand into other regions. By the end of the fourth quarter, the rampant virus had infected Europe and Asia. Almost all the important stock indexes lost more than 30% of their value in 2008. The American S&P 500 declined 38%. Germany’s own DAX lost almost 40%. In newly industrialising countries, it was commonplace to see indexes sink more than 50% and sometimes even significantly more, as in China with 63%. Since the epicentre of the crises was the highly inflated real estate market in the US, this sector completely fell apart. For instance, the European real estate index EPRA fell an incredible 49% in 2008 after it had already fallen 34% in the previous year. Share profits from the last five years for this market segment basically disappeared into thin air. In Germany, it was especially the mortgage real estate sector’s writeoffs in the double-digit billions of euros that prompted political intervention. Only one publicly traded German real estate company managed to escape this negative trend: the German concern EuroShop was able to go against the general decline of 2008 and delivered its investors a respectable 7.9% increase in stock value.