CornerCap Special Report: THE AFTERMATH OF 2008 - A Look at the Lasting Impact of the Credit Crisis

The panic of 2008 is still among us, judging from investor behavior. Most investors are putting a premium on safety at almost any price. This article looks at the lasting impact of the credit crisis: Does it mean we are in a different investment era? Are defensive portfolios that seek extra yield the only prudent strategy in this difficult time?

Key Messages

Market volatility and the fallout of the credit crisis have had a profound negative impact on expectations and investment strategy. Nevertheless, we’ll argue that while we are in a new economic era, we are not in a new era for investing, as investor behavior since 2008 reveals.

Excessive emphasis on defense exposes long-term portfolios to two key risks: 1) not growing enough to meet longer term objectives and 2) actually losing value (the opposite of the intended goal) if inflation materializes.

Recognizing investment extremes, which requires running against the grain, is key to success. We continue to see long term risk to bonds, so we keep maturities short; we find larger high-dividend stocks and US REITs to be expensive; and we see better opportunity in US value stocks, international stocks, and select higher-yielding investments.

While no one can predict the future, we build broad portfolios that align investment tools with probable outcomes to help you achieve your long term goals. In this commentary, we review our method for doing so.