Year of the Financial Tsunami - by Daniel Milano

The year 2008 will probably go down in history as the year of bailouts, crashes and meltdowns. While a number of issues have caused concern for investors, the two most significant factors currently affecting the market are higher energy prices and a severely damaged financial sector. The market implosion that rattled investors and undermined economies around the world now threatens to put off retirement plans of yachts and summer homes in the Tuscan hills.

As growing uncertainty rattles global markets, the top search this year the Toronto Stock Exchange took a gut-wrenching hit, crashing to a three-year low as fear of deteriorating economies spread. It was the third consecutive quarter of negative performance as investors awoke to see their portfolios in the bin.

Throughout the ongoing crisis, central banks cooperated in joint actions to reduce strains the on financial markets. Some included stimulous packages and bailouts and others consisted of interest rate cuts. The Bank of Canada, on numerous occasions, slashed interest rates by as much as one quarter point as fears of following our neighbours in to a recession grew into a reality.

Financial difficulties that begun with the subprime sector of the housing market have grown into a much broader problem. The U.S. took a beating this year particularly in the housing market as mortgage giants Freddie Mac and Fannie Mae seeked help from the government. Now the world waits to see if the Big Three auto makers will receive the same treatment.

The Canadian dollar's fall to a four-year low in recent months could have made output more attractive to our neighbours, but their recent demise makes an influx of fresh orders highly unlikely.

On the travel side, Zoom was one of the many airlines that went belly up leaving passengers stranded in different corners of the world. Fuel prices were too much for the service provider when they decided to abruptly suspend operations with no contingency measures.

American International Group was a hot search item this past year as the faltering insurers took a turn for the worse and became another company that relied of the U.S. government for support.

The Canadian technology provider Research in Motion was also a popular search as their volatile stock saw ups and downs as the company tried to keep BlackBerrys on the hips of every executive in the western world.

This year's financial tsunami created some of the worst possible scenarios investors could imagine. Canadians are likely to hold tight to every penny as they venture into 2009.

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