This will have had a dramatic impact on the investment portfolios of many charities because they are overweight in the financial sector - the reliable, strong income stream that the banks provide year after year has been a solid income prop for many portfolios. But the credit crunch has slashed their market values and has meant that income is not what it was.
With hindsight, we can all have clever ideas about how we would have invested differently. The bigger question is what to do next.
Unsurprisingly, I have been looking around the market for other sectors that can take the place of the banking sector during these difficult times. I am keen on the energy sector because, in the current context, it is one of the best performers. In times of high risk-aversion, the appetite for this sector is expected to remain high. Oil prices will remain high in the very short term.
The industrials sector is another possible investment. Fundamentals in this sector are quite strong. I would recommend investing in large companies with strong international exposure, and infrastructure stocks in particular. Earnings are still supported by strong demand from emerging markets.
Information technology is a third possibility. Even if the sector has been quite volatile in the current economic environment, the trend should be more supportive for IT in the second half of the year. Business investments should recover a normal pace of growth.
Consumer staples look promising. Growth will continue to come from emerging markets with supportive demographic trends in Brazil and China. We believe the sector will benefit from its lower risk characteristic, its high international exposure and its above-average yield.
Finally, there is healthcare. The sector should be helped by its defensive nature in this low-visibility environment. US stocks could outperform European stocks because they could benefit from the dollar weakness to increase their exports.
When the market is blackest, the temptation is to look back and chew over the history that brought us to this unpleasant point. But the smart money is already looking for the opportunities that will inevitably arise in future.
- Andrew Cumming is investment director at Fortis Private Banking