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July 07, 2005
An up day in the market?
In the roughly 10 hours since the London terrorist attacks, we've gone from the Dow futures indicating a 200-point drop at the open to a 20-point gain as we approach the close.
How to explain such a muted reaction? I just spoke with Jeffrey Kleintop, chief investment strategist at PNC Advisors, which manages about $50 billion. He had some ideas.
First of all, he said this kind of reaction is typical of what has happened following about a dozen terrorist attacks he's studied, going back to the Munich Olympics in 1972. Even in the markets where the attack occurred, it often returns to pre-attack levels in a few days, he says.
Kleintop also noted that yesterday the market suffered a sharp sell-off as oil prices spiked above $60. That meant that many stocks that took a further hit this morning suddenly reached levels where investors were ready to step in and buy.
"In general managers have been accumulating shares lately and putting cash back to work," he says. "When stocks hit prices they find attractive, they are picking them up."
Finally, he observes, it seems that on some very fundamental level investors have gotten used to living with the risk of terrorism. As shocking as the London attacks were this morning, once investors saw the damage was contained and economic activity would not be seriously disrupted as a result, they were able to quickly move past the shock and horror. In that sense, higher stock prices may reflect a palpable sense of relief that things weren't worse.
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? Letting Terror Affect Your Investment Strategy from Consumerism Commentary
When terror strikes, it’s easy to think about September 11 and the poor performance of the stock market following the event. It may be better to wait this one out before running for the hills and cashing out. It’s better not to make hasty d... [Read More]
Tracked on July 7, 2005 06:12 PM