Thursday marks a rather depressing anniversary. On Oct. 9, 2007, major U.S. stock indexes closed at an all-time high. The broad S&P 500 index closed at 1,565.15. Today — on Oct. 8, 2008 — the S&P 500 closed at 984.94. That’s a 37% drop in one year.
Even more sobering, from this point the S&P 500 would need to post a 59% gain to re-attain record levels.
In retrospect, the stock market’s peak last October looks bizarre. Problems in the credit market became apparent to fixed income investors in July 2007. While the full extent of the crisis wasn’t yet known, many experts were already very worried — and those credit market participants have remained pessimistic ever since.
Equity investors were far more optimistic at the start of the crisis. While stock markets showed some concern in August 2007, by September many said the subprime crisis was probably “contained” and the market hit new highs in October. How wrong they were.