STRS - STOCK MARKET DOWNTURNS

From Mario Iacone, July 17, 2009

It is obvious that the latest stock market downturn has been the worst in a long time. However, significant market downturns are always with us.

Without proactive Risk Management and True Diversification, all one does is ride up and slide down and would have to hope that he is lucky enough to be up when he retires.

It is even worse for a pension system because they are never going to cash out. Their only option when they are down is cut pensions and increase contributions.

1974 – DOW falls 45% (1051 to 577)

1982 – DOW falls 25% (1024 to 776)

1987 – DOW falls 36% (2722 to 1738)

1998 – DOW falls 20% (9338 to 7539)

2001 – DOW falls 28% (11,338 to 8236)

2002 – DOW falls 29% (10,635 to 7286)

2009 – DOW falls 54% (14,164 to 6547)

STRS members have to work to influence STRS to implement asset allocation which minimizes the effects of stock market downturns.