Survival alone is worthy of much praise

Published on Friday 19 December 2008 19:36

THIS time last year, stock market pundits were quite chirpy about prospects for 2008. But instead our contestants have had to contend with a collapse in the global financial system without precedent.

Banks, equity markets, property values, commodities and currencies have all been hit. The UK stock market is down some 34 per cent on the level a year ago, having sunk to as low as 3,780 at one point. All assets bar cash and the most rock solid government bonds have been affected. This has been a "Black Swan" year, which has sent central banks and governments desperately scrambling to fight off deflation and a descent into depression.

Against the worst backcloth for investors since the 1930s, our contestants have done well to survive. Diversification into cash, bonds and gilts have offered some protection from the worst of the storm. These were well-spread portfolios designed for a fairly adventurous investor prepared to take on a degree of risk – but very few imagined a firestorm such as this.

This spread should ensure a measure of recovery "capture" when it comes. Whether we will have to wait till the spring or later matters less than that central banks and governments have deployed – or are about to deploy – "all necessary tools" to head off the worst recession in memory. Fingers crossed that these measures start to work.