The 15th anniversary of the 9-11 attacks was Sunday. This is one of those moments in life that the memory of an event is so vivid. You say 9-11 and you remember where you were when you heard about it, the images in your mind, and you remember the feelings of shock, horror, and sadness.
9-11 was on a Tuesday and the Stock exchanges market did not open and remained closed until Monday, September 17th. Do you remember what the stock market did after it re-opened 6 days later? Do you remember where it was two months later?
Most people remembered that it dropped. Initially the Dow Jones Industrials dropped more than 7% on the day it opened. For the week, the Dow Jones Industrial Average dropped over 14%! Imagine buying on Sept. 10th. How long would it have taken for an investor to be back in positive territory after initially suffering massive losses? Believe it or not, just two months. Two months.
By November 2001, the stock market was trading at a higher level than where it closed on September 10th.
The market’s behavior after 9-11 was right in line with historical precedent. A study was performed identifying what was considered the 28 worst political or economic crises over the six decades prior to 9-11. In 19 of these 28 cases, the Dow Jones Industrial Average was higher 6 months later after the crisis began. We saw the same thing happen with the recent Brexit event.
The market is similar to life. Something happens that kicks in a strong emotional feeling. I’m sure we have all experienced this feeling. In the majority of cases, if we reacted right away to an emotional feeling the outcome was usually not good.
The same goes with the stock market.
Emotions kick in and some investors react immediately in the wake of a crises. And the reaction is usually selling at the wrong time, after an initial big drop by the stock market.
Most investors should stick with their plan which means doing nothing. If you feel you need “to do something”, consider re-balancing your portfolio. Re-balancing is a disciplined process to reduce your winners and buy/increase your allocation to your underperforming sectors.
In reflecting back on the 9-11 event, it was amazing to see how resilient a nation we are and how strong our power of Hope. While healing can take a long time, after major events, the stock market tends to bounce back quickly reflective of resilience and hope.
If you’d like help reviewing your investment strategies and saving for retirement, please contact Casey Boland via email [email protected] or 513-598-5120.
Date Posted: 09/12/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.