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Could Silicon Valley Bank be this decade’s Lehman Brothers?

The bankruptcy of Lehman Brothers in 2008 sent shockwaves through the financial world, resulting in a significant impact on savings and investments for individuals and businesses. Lehman Brothers was a global investment bank, and its collapse was one of the major triggers of the global financial crisis. This year, the Silicon Valley Bank collapsed in a similar manner, prompting economic forecasters to make grim comparisons between the bankrupcies of the two international banks.

The impact of Lehman Brothers’ bankruptcy on traditional investments like stocks, bonds, and mutual funds was severe. The value of these investments plummeted as investors panicked and sold off their holdings, leading to a significant decline in market prices. Many individuals and businesses saw their retirement savings and investment portfolios wiped out, leading to financial distress and uncertainty. Many fear today that the collapse of SVB could have the same impact as the Lehman Brothers collapse. Some say that the impact could be even more severe given the poor state that the economy was in prior to Silicon Valley Bank’s collapse; the Covid-19 pandemic petrified the global economy and the Russo-Ukraine war has caused significant instability in financial markets.

Fortunately, alternative investments like fine art, private equity, hedge funds, and commodities are less impacted by sudden shocks to the economy such as Lehman Brothers going bankrupt or the collapse of Silicon Valley Bank.

Fine art has a stable history of resilience during financial crises, experiencing much less severe losses than the S&P 500 in 2008 and also recovering to pre-crisis levels in half the time taken by the FTSE 100.

Commodities and Fine Art, can act as a hedge against inflation and currency fluctuations, making them a valuable addition to a diversified portfolio. Investing in alternative assets like these can help protect against the kind of systemic risk that Lehman Brothers’ bankruptcy presented.

In conclusion, the impact of international banks such as Lehman Brothers and Silicon Valley Bank can be severe, but alternative investments can provide a level of protection against market shocks. It’s important for investors to diversify their portfolio and consider alternative investments to minimize the impact of events like these on their financial well-being. Read our alternative investment post to discover even more benefits afforded to alternative investors 

 

Trust De Pointe to guide you through the complexities of the alternative investment market. Contact us today to learn more about our services and how we can help you achieve your investment objectives.

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