The past decade has been shaped by the aftershocks of the financial crisis and the ascendancy of passive and quantitative investing.

Investors have enjoyed one of the longest and strongest bull markets in history, but it has often also been called the most “hated” rally of all time. The economic recovery has been rocky and subdued, and nerves have been frayed by a series of major and minor shocks.

Here is the FT’s pick of some of the biggest moments and themes that encapsulate an uncertain, fragile decade for markets.

A decade living passively

When BlackRock swooped for Barclays’ asset management arm in 2009, some thought the $13.5bn price tag excessive, and doubted that the growth rate of the iShares exchange traded fund business could be sustained. Today it looks like the steal of the decade.

The ETF industry has grown dramatically in size, breadth and complexity in recent years. At the end of 2009 there was just over $1tn in ETFs. Today there is almost $6tn.

Not everyone is thrilled. “Passive investing is in danger of devouring capitalism,” said Paul Singer, the founder of Elliott Management, one of the world’s biggest hedge funds, in a letter to investors in 2016. “What may have been a clever idea in its infancy has grown into a blob which is destructive to . . . free-market capitalism.” Robin Wigglesworth

A graphic with no description

May 2010

Flash crash

The US market “flash crash” of May 6 2010 lasted only 20 minutes but illustrated to naive investors and regulators how thoroughly automation had permeated trading without them noticing.

The Dow Jones Industrial Average dropped nearly 9 per cent in under five minutes — one of the biggest crashes in Wall Street history. A circuit breaker halted the plunge and gave the humans a chance to catch up.

In the aftermath, bewildered regulators intensified their focus on the sprawling links between equities and futures markets. For many investors it was their first warning of a new group of market actors: high-frequency traders.

An official report blamed a $4.1bn futures trade from a fund manager in Kansas. Six years later a sole trader in London, “the Hound of Hounslow”, pleaded guilty to criminal charges that he also played an influential role that day by manipulating futures. Philip Stafford

2010-2015

The Greek crisis

When Greece revealed in late 2009 that its budget deficit was more than twice the size of its previous estimate, it proved to be the first tremor in a crisis so severe that it threatened the fabric of the common currency area for years.

A succession of summits aimed at solving Greece’s financial woes failed to arrest a storm that enveloped Ireland, Portugal, Spain and Italy and threatened to plunge the global economy back into recession.

Several countries were forced into humiliating bailouts, Greece had to default on and restructure €200bn of its debts — the biggest sovereign bankruptcy in history — and suffered a gruesome economic depression. By the end of 2019, the country had finally been rehabilitated in the debt markets. Robin Wigglesworth

Line chart of Spreads between benchmark and German 10-year bond yields (percentage points) showing Spillover of the Greek debt crisis

July 2012

‘Whatever it takes’

When Mario Draghi stepped on to a stage in London, the eurozone’s debt crisis was threatening to spiral out of control. With three words — “whatever it takes” — he arguably prevented the currency bloc from falling apart.

The ECB president’s promise to preserve the euro quickly restored confidence to the region’s bond markets. Highly strained borrowing costs began a decline that has continued, with only brief interruptions, until the present day.

The ECB’s subsequent attempts to jump-start growth and inflation have a much patchier record. But the fact that the possibility of a country leaving the eurozone today rarely crosses investors’ minds can be traced back to those three words. Tommy Stubbington

August 2012

Praying for rain

Fears a food shortage ran through the globe as US corn and soyabeans hit record highs in 2012 after crops were devastated by the worst drought in the US for 50 years.

Crops shrivelled in the fields as the US saw the hottest year on record, and the prices of the two staple commodities, mainly used to feed livestock, surpassed the peaks of the 2007-08 food crisis.

Corn hit a record $8.44 a bushel in August, while soyabeans jumped to $17.95 a bushel in September. Tom Vilsack, the then US agriculture secretary, said he was on his “knees every day” praying for rain. “If I had a rain prayer or a rain dance I could do, I would do it,” he said at the time.

The damage to rural America was severe, but in the end, with the global supply of the two commodities most important for food security — wheat and rice — remaining relatively plentiful, there was no reprisal of the food panic which had gripped the world five years earlier. Emiko Terazono

Line chart of CBOT corn ($ per bushel) showing Hottest year on record in US pops corn in 2012

2013

Taper tantrum

Ben Bernanke threw markets into a spin in 2013 when he pointed out what, in retrospect, should have been obvious: that the Federal Reserve would not keep up its emergency stimulus measures for ever.

The then Fed chairman said the central bank would probably start trimming, or tapering, its $85bn-per-month bond-buying programme that year, and end it altogether the following year. The resulting so-called taper tantrum, dominated by heavy bond selling, was severe.

One key concern at the time was that the huge flow of investments into emerging markets that had rushed in during the Fed’s QE era was in danger of reducing or even reversing entirely. India’s rupee, for one, plunged to a record low. The episode offered the first real taste of how hooked investors had become on central bank support — an addiction that markets are still trying to manage. Katie Martin

2014

Crude collapse

Oil’s rally to more than $120 a barrel during the Arab uprising. The near-30 per cent crude slump at the height of the eurozone crisis. The spike back above $80 last year ahead of US sanctions on Iran. All these events were significant for oil traders.

But in oil market folklore they are dwarfed by the defining move of the decade: crude’s collapse in 2014-16, which brought the $100-a-barrel era to a jarring halt and left ripples that are still felt across the world today.

It took traders a few years to appreciate the magnitude of what fracking was unlocking in the shale fields of Texas and North Dakota. But by 2014 new supplies started to overwhelm the market, flipping the outlook from one of scarcity to surplus.

Saudi Arabia tried to fight by opening the taps to drown its upstart rival. But shale came back stronger, forcing Riyadh into a once unlikely oil alliance with Moscow to try to manage supplies. Crude might have since recovered from $30 a barrel to about $60 today, but the industry has been transformed with little expectation of a return to significantly higher prices. David Sheppard

Line chart of $ per barrel  showing Crude oil

2014

Trick or treat from the BoJ

On October 30 2014, the Japanese stock market was in relatively robust health and the yen was soft enough to take some of the pressure off big exporters. Abenomics and the associated Bank of Japan policies — about to enter their third year at the time — seemed to be humming away reasonably well.

That is why the “Halloween” BoJ policy meeting caught everyone off guard. Some declared it a clear signal that the BoJ now considered itself a participant in a global currency war. Others warned — correctly as it turned out — that one of its central elements would suck liquidity from the government bond market and permanently distort trading.

The shot involved a massive increase in qualitative and quantitative easing, a big increase in the monetary base and an open-ended commitment to an inflation target of 2 per cent. The move included a 60 per cent increase in the BoJ’s annual purchases of government bonds from ¥50tn to ¥80tn.

Surprises on this scale from the BoJ had become rare, and the acute rise in equities and a stomach-turning drop for the yen reflected that. Leo Lewis

2015

Bitcoin catches on

As the decade began, bitcoin was known only to a handful of computer-savvy libertarian enthusiasts who wanted an electronic payments system that functioned outside institutions they considered to be discredited.

The asset — in reality just a piece of computer code — was just over a year old and the brainchild of a mysterious author named Satoshi Nakamoto. Its value was a reward for verifying previous electronic transactions and early deals put it at less than a dollar.

What has followed is an explosion of global interest, from central banks to ordinary consumers, as bitcoin’s value has rocketed and dropped vertiginously, powered by social media-driven enthusiasm. Prices soared from about $400 in early 2016 to about $20,000 in 2017, before more than halving.

Bitcoin has spawned similar cryptocurrencies, multimillion dollar thefts from exchanges and regulatory investigations into links with money laundering. It remains a niche asset with little real-world application but bad headlines have not killed off interest in digital currencies. The identity of Satoshi Nakamoto remains a mystery. Philip Stafford

Line chart of $ per bitcoin showing Bitcoin's rocky ride

2015

China’s bungled currency revaluation

China faced dual crises of its own making in 2015. The first came when a stock market bubble that had been inflating since late 2014 finally popped. The rally had been fuelled by an explosion in risky margin lending, in which investors borrow money from brokerages to buy stocks. Regulators initially looked the other way, while state media encouraged investors to plough more money into the market, implying the rally had government backing.

Authorities clamped down on this practice in June, and by late August the ensuing rout had lopped off more than Rmb24tn ($3.4tn) from China’s total market capitalisation, prompting Beijing to mobilise a “national team” of state-run investors to stabilise the market.

That same month, the People’s Bank of China set the renminbi’s daily exchange rate against the dollar sharply weaker, prompting a shock devaluation that convulsed global markets and spurred huge capital outflows on fears of further depreciation.

Beijing was ultimately forced to spend most of 2016 burning through forex reserves to slow the renminbi’s fall as it tightened capital controls to stem outflows. Hudson Lockett

Line chart of Foreign currency reserves, $tn showing PBoC burned through $1tn in reserves to support the currency

2015

The Swissie shocker

If you enjoy watching currency traders turn a little green around the gills, one good trick is to ask where they were on the morning of January 15 2015.

Then, to the utter astonishment of the market, the Swiss National Bank abandoned its policy of ensuring the euro traded above SFr1.20. Three years of pent-up demand for the franc, generated by a hunt for safety during the eurozone’s debt crisis, was unleashed in one blast.

Part of the shock value came down to the fact that the SNB had been singing the praises of its franc-damping policy only days beforehand. In retrospect, though, it is hard to see how it could have done it any other way. In any case, at the time, traders had taken the central bank at its word, meaning banks were left with hundreds of millions of dollars worth of losses, some smaller brokers went out of business, and investors learnt the hard way to treat rock-solid assurances from big central banks with a pinch of salt. Katie Martin

Line chart of Swiss francs per euro showing The Swiss factor

June 2016

Bund yields hit zero

The post-crisis rally in bond markets chalked up a landmark in June 2016 as Germany’s 10-year yield fell below zero. Some short-dated bond yields in the eurozone had been negative since 2014, but many presumed it was a blip.

Negative yields on Bunds — which serve as the benchmark safe asset for the entire eurozone — were a powerful symbol of how far central bank stimulus had overturned traditional assumptions about the functioning of bond markets. In a world awash with easy money, investors were prepared to pay the German government to look after their cash for a full decade.

The period since the financial crisis has been painful for anyone betting that a 30-year bull market for bonds was over, such as Pimco founder Bill Gross who a year earlier said Bunds were the “short of the century”. Germany’s 10-year borrowing cost touched a record low of minus 0.72 per cent this year. Tommy Stubbington

Line chart of German 10-year bond yields (%) showing Bund yields turn negative

‘Tina’: let the good times roll

The dominant theme for markets over the past decade has been central banks acting aggressively to quell any dangers to the economic recovery, leading traders to dub this the era of “buy the dip” — betting that any bout of turmoil proves to be only a buying opportunity.

This mentality became so entrenched that one of the bestselling T-shirts on StockTwits, a website for day traders, shows a basketball player dunking on a bear and the logo BTFD, or “Buy The F***ing Dip”.

With concerns that a new downturn may be looming, BTFD has been replaced by a new acronym: TINA, or “There is no Alternative” to buying equities. Although investor nerves have been periodically frayed by financial, political and economic ructions, many investors have in practice had few alternatives but to hold their noses and buy stocks. Robin Wigglesworth

The new value investing: ESG goes mainstream

At the beginning of the decade, if you asked investors about ESG, you would have been forgiven for thinking it stood for “eye rolls, sneers and groans”. But investing based on environmental, social and governance guidelines has hit the mainstream.

Consultant Mercer’s decision in 2012 to start rating investment managers on ESG marked a watershed. Investors are still, of course, free to ignore ESG, but the fact that a major consultancy would be grading managers on the sustainability of their portfolios moved the issue out of the exclusive realm of do-gooders.

There is much disagreement over the size of the market — some groups peg the total assets under management in ESG strategies as high at $30tn while others think it is closer to $3tn.

Looking ahead, fund managers know they face a tough question: which of them will manage Greta Thunberg’s pension? Catering for the next generation of wealth owners will demand new standards.

Billy Nauman


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