Flight to Safety
Until very recently, the steady stream of bad news about the global economy, combined with rapidly declining portfolio values, made many investors contemplate selling their equity positions in advance of further anticipated losses. The purpose of this brief is to explain some of the trade-offs and corresponding risks of such an action, and to provide a quick reminder about the way markets work. I hope this offers some rational perspective to these very emotional times.
The chart on the back page is an unfortunate reminder of the severity of peak-to-trough declines in various global equity asset classes. As you can see, the left side of the chart is the percentage decline in the markets while along the bottom are corresponding asset classes organized in terms of lowest-risk to highest risk.
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