NCPA - National Center for Policy Analysis

History Says Markets Withstand Shocks

September 25, 2001

While there is no direct precedent for the terrorist attacks of September 11, lesser disasters have struck American financial markets before. A look back, observers say, can help us look forward more clearly and calmly.

  • An anarchist bomb on Wall Street in 1920 killed 40 people (the worst terrorist attack to that date) - but when trading resumed the next day stocks rose 1.5 percent.
  • After Pearl Harbor was bombed, stocks dropped for two sessions -- but an investor who bought U.S. blue chips just after Pearl Harbor and held them through the end of the war would have earned more than 25 percent annually.
  • The market dropped 2.9 percent the day President Kennedy was assassinated, but rose 4.5 percent the next day and gained 25 percent over the next 12 months.
  • The market also shrugged off the 1993 World Trade Center bombing when six people were killed and more than 1,000 injured -- stocks dropped only 0.5 percent the next day and rose 13.7 percent over the next 12 months.

The modern financial history of the U.S. holds no example of a physical disaster or war wreaking havoc on investment returns. The World Trade Center attack, which already stands apart from normal experience, could prove the exception, but the odds seem against it.

Source: Jason Zweig, "What Can We Learn From History?" CNNfn (Cable News Network fn), September 21, 2001.


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