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The Bear market started with the Sub-prime lending market problems in Sept. 2007, the longest profit slump in six years, the first nationwide decrease in home prices since the Great Depression, record oil prices and fears of a recession resulted in a 26% market decline in 2008.
- January: International market drops (some in reaction to US problems) and fears of a recession result in a 9% loss in the first three weeks of the year.
- June: Rises in oil prices and Fannie Mae - Freddie Mac problems with bad mortgages as the housing market worsened.
  June 6 posted a 3.1% loss, and June 26-27 a 3.9% loss.
Sept - Oct, 2008 crash:
- Aug. 15 problems with financial institutions produced the largest single day point loss since 9/11 with a 504 pt. (4.4%) loss (see Sept. chart below).

DOW 2007-2008 Prices sept 2008

Over the weekend and on Monday, Sept. 15, 2008 Merrill Lynch, one of the biggest and best-known brokerage firms in the world, was sold to Bank of America for $50 billion due to financial difficulties stemming from problems in the mortgage markets. Lehman Brothers, unable to find a buyer, filed for bankruptcy . On Wed. the US Federal Reserve struck a deal to take control of AIG in return for an $85bn loan to stave off a collapse of the giant.
DOW Sep 2008

On Monday, Sept. 29 the congress rejected a "bail-out" bill to authorize $700 Billion for the government to buy up bad loans; the Dow dropped 777 points or 7%, the S&P dropped 8.8% and the Nasdaq dropped 9.1%.
The bail-out was passed on Fri. Oct. 3 but financial lending continued to be forzen.
DOW Sep 2008

The week of Oct. 6-10 was the worst week in history point wise when the Dow dropped 1,874 points or 18.2% 2nd worst percent loss since the 1929 depression.
DOW Sep 2008
weekly change

On Monday Oct. 13 the market had it's largest single day gain of 936 points on the Dow or 11.1%
DOW Sep 2008

The Chicago Board of Options Exchange (CBOE) Volatility (Fear) Index (VIX) hit a record of 80.9 on Nov. 20, 2008
See: VIX FAQs at the CBOE

Vix volatility index

It took almost 5 1/2 years to recover.

See long term chart.

Effect on Income:
  • Families in the middle to uppermiddle parts (between the 40th and 90th percentiles) of the income distribution saw little change in average real incomes between 2010 and 2013 and thus have failed to recover the losses experienced between 2007 and 2010.
  • Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013, although mean and median incomes were still below 2007 levels.

Source: Changes in U.S. Family Finances from 2010 to 2013 - Survey of Consumer Finances (SCF) FederalReserve.gov

Source: Survey of Consumer Finances (SCF) FederalReserve.gov
Mean income (average of all incomes) is about twice the median (income level with 50% above and 50% below) because of very high income families.
See mean income.
Households with holdings are those who own stocks, homes, etc. By 2013 almost 100% of families headed by someone about the age of 35 had some type of asset. For families where the householder was under the age of 35, the percent holding assets fell from 97 percent to 92 percent.

Source: Median Household Incomes by Age Bracket: 1967-2015 - dshort - Advisor Perspectives

Net Worth took a even bigger hit

Source: Survey of Consumer Finances (SCF) FederalReserve.gov

Percentage of families holding specific types of assets:
Age Stock holdings,
direct or indirect
Vehicles Primary
Other residential
2007 2013 2007 2013 2007 2013 2007 2013
35-44 55.9% 53.9% 87.5% 85.5% 66.1% 52.9% 12.2% 5.8%
45-54 63.1% 54.9% 90.3% 92.5% 77.3% 63.7% 15.7% 10.1%
55-64 60.8% 57.2% 92.2% 95.6% 81.0% 80.6% 20.8% 16.1%
65-74 53.1% 49.2% 90.6% 96.4% 85.5% 88.6% 18.5% 25.2%
Source: Behind the Numbers: The dismal state of consumer finances in 2013| Deloitte University Press

See Also:
Market Volitility
Bear Markets

Return to Investing

last updated 29 Oct 2008