Treece Blog: Financial ramifications of 9/11 (or the lack thereof …)Written by Ben Treece | | firstname.lastname@example.org
Sept. 11, 2011, was without question a defining moment for an entire generation of Americans. While our parents and grandparents remember where they were when JFK was shot, we will all remember exactly where we were and what we were doing when the Twin Towers were attacked. While this was a moment that would be etched into our minds forever, the markets viewed the attacks as a minor blip on its long-range radar.
The Dow Jones lost 16.5 percent from Sept. 10, 2001 to Sept. 22, 2001, but had recouped nearly all of those losses within six weeks. The bottom on Sept. 22, 2001 was not even the ultimate bottom in that market downturn. The real problems for the market came during the fall of 2002 when the tech bubble burst and the Dow Jones dropped below 7,300. If the average investor were to view a chart from January 2000 through January 2003 without knowing any of the dates corresponding to the chart, most would probably guess incorrectly which downturn was due to the terrorist attacks.
After the attacks there was indeed a massive sell-off in the markets, but it was incredibly short-lived considering the magnitude of the events. After those six weeks the Dow Jones was right back where it was on Sept. 10, 2001.
As a point of reference, the recent market downturn caused the Dow Jones Industrial Average to drop from 12,800 to 10,800 starting in mid-July through the first week in August. That is a 15 percent loss, almost identical to what was lost immediately following the attacks.
Looking back at the charts, we can see that the market peaked in January of 2000 at about 11,250 (for those of you keeping track, if you bought and held the Dow from January 2000 until September 2011, you haven’t made a thin dime). However, the market was also beginning to trend down around this time. Peaks were at lower levels and troughs were continuing to break through previous lows.
The fact of the matter is that even though 9/11 was a tragedy that touched us all in some way, it really did not have a serious long-term impact on the markets. We have said for quite some time that events do not shape markets, long-term economic conditions do, and the markets have proved that thesis true time and again. Look most recently at the tsunami in Japan.
The fear was that one of the major shipping and manufacturing hubs in the global economy was going to fold and the world was going to end. The Nikkei saw a massive sell-off and U.S. stocks dipped amid investor fears as well. However, the Nikkei recovered within two months and U.S. stocks were back to business as usual within two weeks.
While it is true that macroeconomic conditions will always trump short-lived events in the marketplace, we would like to believe that the resiliency of the American people helped keep us going during that unimaginable time. The New York Stock Exchange closed Sept. 11, 2001 and reopened Sept. 17, 2001, just four business days after the towers were hit. As a country we were united as one and willing to show that this would not be our demise and that we would continue on with our lives, always remembering and promising never to forget.
Ben Treece is a 2009 Graduate from the University of Miami (Florida), BBA International Finance and Marketing. He is a discretionary money manager with Treece Investment Advisory Corp. (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.