What Investors Can Learn From 9/11

Yesterday marked the 20th anniversary of 9/11, the worst domestic terrorist attack on US soil in our history. Everyone remembers exactly where they were and what they were doing when they realized America was under attack. As we watched the events unfold in real time, we were all trying to comprehend what exactly was going on and what was going to be the full extent of the attack. People with loved ones in NYC were franticly trying to determine if they were ok. Unfortunately, approximately 3000 people were killed, and that attack changed our country forever. When the attacks occurred that Tuesday morning, trading on the stock market was halted for the rest of the week. On Monday September 17th investors were fearfully waiting to see how markets would open after

Asian and European plunged the previous week. The S&P 500 lost 11.6% that week while the Nasdaq lost 16.1% for the week. The Dow, which closed at 9,605.51 on Sept. 10 bottomed at 8,235.81 on Sept. 21. Once investors realized that life would go on (although with a new normal) and once the Fed jumped in cutting the Fed funds rate and supplying the markets with ample liquidity, the Dow would fully recover all losses in less than two months. When there is uncertainty markets typically go down because investors are all simultaneously trying to reduce their risk by selling equities and perhaps buying gold. 20 years later as the Dow Jones sits about 4 times higher than it was after 9/11, investors would be wise to remember that skittish investors who panic during times of crisis usually get the short end of the stick and brave investors who view times of extreme uncertainty as buying opportunities have thus far always been rewarded. Long term investors who don’t pay much attention to the news and the “crisis of the day” and stick to their long term plans usually do better than the investors who are always trying to buy and sell based on the latest current events.