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The Market's Triumph over Terror

From Standard & Poor's Equity Research

I can now appreciate why many war veterans have no interest in watching combat movies. Having stood less than a tower's length away from Ground Zero five years ago, seeing, hearing, and feeling the attacks and their aftermath, I have no desire to watch September 11 films or made-for-TV movies.

When I was witnessing what many would call this century's Pearl Harbor, Lusitania, or the sinking of the Maine, I was of course unaware of the longer-term impact that the attacks on the World Trade Center towers and the Pentagon would have on our economy and capital markets. But in retrospect, I think it's encouraging to see the resiliency of capitalism, as symbolized by substantial share-price appreciation (see BusinessWeek,com, 9/11/06, "September 11's Economic Legacy"). This is indicative to me of at least one triumph we have achieved over those attempting to destroy our way of life.

The table below, listing cumulative price changes (excluding reinvested dividends) for the benchmarks and sectors in the S&P Composite 1500, along with those subindustry indexes that posted the highest and lowest price changes, shows that not only did all three of the components of S&P's Composite 1500 Index (the S&P 500, S&P MidCap 400, and S&P SmallCap 600) gain from 19% to 73% in this five-year period, but that nine of the 1500's sectors also advanced.

CLIMBING HIGHER. What's more, the subindustry indexes with the highest cumulative performances demonstrate to me the ongoing health of global economies and the resulting increase in demand placed on energy, basic materials, and other cyclical areas of the marketplace, despite the attempt by terrorists to throw the market into a tailspin.

And even though I offer a roster of subindustries that also declined during this period, what isn't apparent is that nearly 80% of the subindustry indexes in the S&P Composite 1500 (79% to be exact) posted increases since the close on the day prior to those tragic events.

Cumulative Price Changes (ex. divs.) for Benchmarks and S&P 1500 Subindustry Indexes 9/10/01-9/8/06

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