Now is definitely not the time to panic
By ROB CARRICK, The Globe and Mail
Wednesday, September 12, 2001
Money talk seems a bit inappropriate right now, so let's cut to the chase on the matter of your investments. Financial markets are going to be chaotic as they react to the terrorist attacks on the United States and the one sure thing is that a lot of money is going to be lost. If you're an investor who has already endured a lot of pain in the past year, the unfortunate reality is that more is coming. No one knows how much, just as no one really knows how these events will play out. The correct reaction here: Be cool. The one thing experts seem to agree on is that stocks and bonds have historically transcended disasters of all kinds over the long term.
"If the market is going to freefall, it's going to freefall for a bit and eventually it will come back," said Cynthia Kett, a financial planner and principal at Toronto-based Stewart & Kett Financial Advisors Inc. "At this point in time, I don't think there's anything investors can do to mitigate the damage." That means putting aside any ideas you might have about trying to dump stocks this morning, or whenever the stock markets reopen. It's widely expected that there will be a tidal wave of selling - just let it wash over you. "It never pays to sell at a time of panic selling, and my feeling is that there's going to be panic selling," said Pat McKeough, a long-time market watcher who edits a respected newsletter called The Successful Investor. Mr. McKeough said the markets fell sharply when former U.S. President John F. Kennedy was assassinated in 1963, an event equivalent to Tuesday's terrorist attack in its shock value. Very quickly afterward, the market snapped back. Don't pin your hopes on a repeat of this, however. Just now, it's hard to imagine a back-to-business attitude returning any time soon in the markets or elsewhere.
Some investors may have ideas about hunting for bargains amid the confusion to come. Go ahead, as long as you can stomach the possibility of losing significant money before you make any. "There will be some very good values and buying opportunities that will arise as people overreact, but we're in unprecedented territory here," said Terry Jackson, president and chief executive officer at money managers MacDougall MacDougall & MacTier Inc. "With this much uncertainty, people should let things settle out and watch what happens. Don't make a full bet on anything going on in the next few days." Be especially wary of speculative stocks, like those in the technology sector. Tech stocks continue to beguile, but they'll almost certainly take the worst of it if the markets struggle on in the coming months. It's anticipated that the stock markets will be scary once trading resumes. The Toronto Stock Exchange 300 composite index fell 295 points before an early close Tuesday morning, but that was before the enormity of what happened became fully apparent. The U.S. markets never opened, which means there's pent up fear and horror to be purged. In a perverse way, you can argue that a big fall would be healthy for the markets, even considering the losses to date. Some market watchers believe that the stock markets won't come out of their current funk until there's a so-called capitulation, or one last spasm of selling.
Once that's out of the way, the markets are in a position to gradually recover. Regardless of how things play out in the days ahead, there are those who believe that the markets will be in better shape before too long. "We've been looking for September and October to be bad and then for a pickup in November," said Katherine Beattie, a senior technical analyst with Standard & Poor's MMS. "A year from now, I think we're going to be significantly higher than where we are now." A lot of investors haven't owned stocks long enough to know how mean the market can get at its worst. Some may find their faith in stocks has been shaken, maybe beyond repair. Mr. Jackson of MacDougall MacDougall & MacTier said he's been in