15th Anniversary of Lehman Brothers Bankruptcy: Reflecting on the Impact

Friday marked the 15th anniversary of one of the most significant events in stock market history – the bankruptcy of Lehman Brothers. On September 15, 2008, Lehman Brothers, a financial services company, filed for bankruptcy, triggering a chain of events that led to a global recession.

Lehman Brothers, with $639 billion in assets and $619 billion in debt at the time of its collapse, filed for the largest bankruptcy in American history. As the fourth-largest investment bank in the U.S., Lehman Brothers had approximately 25,000 employees when it went bankrupt.

The collapse of Lehman Brothers was a result of multiple factors, but its significant holdings in subprime mortgages and the subsequent decline in mortgage values were major contributors. The event sent shockwaves through the financial markets, causing the S&P 500 to plummet to its lowest closing price in three years, and the Dow Jones Industrial Average to drop over 500 points on that fateful day.

To assess the impact of the Lehman Brothers bankruptcy, let’s consider how investments in exchange-traded funds (ETFs) tracking the two leading market indexes would have performed over the last 15 years.

Investing $1,000 in the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 Index, on September 15, 2008, could have purchased 11.15 shares at an adjusted closing price of $89.67. Today, that investment would be worth $4,944.69, representing a remarkable return of +394.5% and averaging annual returns of over 26%.

Similarly, a $1,000 investment in the SPDR Dow Jones Industrial Average ETF Trust (DIA), which tracks the Dow Jones Industrial Average, could have bought 12.89 shares at an adjusted closing price of $77.57. Today, that investment would be valued at $4,458.52, showing a return of +345.9%.

Reflecting on the 15th anniversary of the Lehman Brothers bankruptcy reminds us of the volatility and impact that market events can have. It serves as a significant reminder of the need for diversification and a long-term investment strategy.

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Definition of Lehman Brothers Bankruptcy: Lehman Brothers bankruptcy refers to the financial collapse of Lehman Brothers, a global financial services company, in September 2008. It was one of the major catalysts of the global financial crisis and had a significant impact on the stock market and the economy.
Definition of Subprime Mortgages: Subprime mortgages are home loans granted to individuals with low credit scores or a high risk of default. These mortgages often come with higher interest rates to compensate for the increased risk for lenders.
Definition of Exchange-Traded Funds (ETFs): ETFs are investment funds that trade on stock exchanges, providing investors with exposure to diversified portfolios of assets such as stocks, bonds, or commodities. They are designed to track the performance of specific indexes or sectors.