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Comment: Lessons from the Past: What 1987, 1997 and 2007 teach us about getting to 2027, 2037 and 2047

Monday, August 14, 2017

Matthias Knab, Opalesque:

Neuberger Berman writes on Harvest Exchange:

In my previous "Perspectives", I wrote about the perils of complacency, the value of humility and the virtues of the diversified portfolio, even when all about us appears becalmed. As if to reinforce the point about humility in the face of the unpredictable, support for that concept arrived sooner than we might have anticipated.

Heated rhetoric from both North Korea and the U.S. fell like a rock into the still pool of the markets last week. As we mark a string of round-number anniversaries of major financial crashes, this turn of events invites us to think about what periods of volatility from the past can teach us about how to build portfolios today.

The "Seven-Year" Curse

If you work in financial markets, you could be forgiven for thinking there's a curse on the third and fourth quarters of years ending in a seven.

In 1987, equity markets peaked, up more than 30% year-to-date, in mid-August. Black Monday seemed to come from nowhere two months later.

In 1997, Thailand, straining under a mountain of debt and unable to get enough hard currency to defend its currency peg against the U.S. dollar, had to let the baht float in July. Instead, it sank, bankrupting the country and sending a vicious contagion through much of Southeast Asia. Thailand and the Philippines requested IMF a......................

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