Bridgewater is focused on understanding the historical cause-effect relationships of complex economic situations. As we look back at the events of 2008, we invite you to explore some of the crisis-era research and decision-making that enabled our investment team to understand what drove the market and helped us weather the greatest financial storm of a generation.

 

Identifying the Signals of a Crisis

Long before the events of 2008, Bridgewater’s investment team set in place the tools needed to recognize and understand signals of economic turmoil. Hear firsthand from key members of the investment team about how this framework led to insights and critical decision-making:

 

Managing money through the 2008 financial crisis felt in many ways like trying to navigate our way through a blizzard—a flurry of information would hit us day after day that we had to make sense of in order to be able to react well to the evolving conditions. Living through that experience reinforced the value of having a template to help us understand what was going on. While most people have not lived through many big debt crises, these crises have happened many times throughout history. By studying them we were able to understand their commonalities, allowing us to process the dynamics unfolding in the economy and markets in the context of how big debt crises typically play out. While there were many moments along the way where we did not know what would happen next or were wrong in our assessments, our template was like a map that helped us figure out which path we were on. This approach helped us enormously, enabling us to manage money well and keep our clients’ money as protected as we could, despite the extreme market environment.

In the timeline below we’ll revisit our experience living through the financial crisis through the lens of the research that we were carrying out at the time. This will give you a window in to the process we followed to improve on our mental map for how a crisis of this sort typically plays out—a map that we began building decades earlier, as we managed money through the emerging market debt crises of the 1980s and Japan’s bursting bubble and depression of the 1990s. While this is by no means a comprehensive account of the 2008 crisis (and a more in-depth treatment is available in Section 2 of the book), it will give you a sense of how we processed the arc of events as it unfolded.