Disbelief, fear, grief, anger -- these feelings were common after the horrific events that shook our nation on Sept. 11, 2001. Just as humans experienced waves of emotions, the stock market experienced waves of volatility. However, it's important to remember that America has surmounted crises before.
Examining how some past global problems have affected the U.S. stock market may help you better grapple with the economic and investment uncertainties of catastrophic events.
Action and reaction
It may reassure you to know that the stock market has historically rewarded those who stayed on course during tumultuous times. Keep in mind, past performance cannot guarantee future results. For instance, the first trading day after the Cuban Missile Crisis (Oct. 23, 1962), Standard & Poor's 500 fell 3.78 percent. Yet only six months later, it had surged 24.66 percent. More recently, over the one-month period after Iraq invaded Kuwait -- a move that eventually led to the first Gulf War -- the S&P 500 declined 9.12 percent. One year later, the index had jumped 10.16 percent.
Sometimes the market's rebound has been slower in coming. For instance, after the bombing of Pearl Harbor, the S&P 500 experienced an initial drop, rose slightly after one month and then found itself lower six months after the attack. But by VJ Day, less than four years later in August 1945, the S&P 500 had rebounded 57 percent.
Of course, economic developments take time to play out and markets often remain highly volatile in the immediate wake of a world crisis. Aside from keeping history in mind, how might you cope in our ever-changing world? Consider these suggestions:
Remember that while our nation has faced crises before, the economy and the stock market have recovered, in time, stronger than before.
Again, please remember, past performance is no guarantee of future results.
Wilsey is a registered principal with Linsco/Private Ledger, a member of the SIPC. "Smart Investing with Brent Wilsey" can be heard Saturdays at 8 a.m. on KFMB AM 760 and Tuesdays at 12:30 p.m. on Channel 8 news. Contact him at email@example.com. Comments may be published as Letters to the Editor.