Markets face an uncertain world
Published 9:00 pm Wednesday, September 12, 2001
Associated Press
NEW YORK — When the stock market does reopen Friday or Monday, investors will face what Wall Street loathes the most — uncertainty.
The market, which already had been struggling from a weak economy, could wobble or swing wildly as it confronts stark new questions about the future of business and the economy. U.S. markets have been closed for two days because of Tuesday’s hijacked-plane attacks on the World Trade Center and the Pentagon.
"Part of the residue of these attacks is you will have more uncertainty, more volatility in the marketplace for a longer period of time," said Bob Webb, a finance professor at the University of Virginia McIntire School of Commerce.
A litany of questions will plague skittish investors when stocks resume trading, perhaps as early as Friday.
There will be no answers for now. And there are plenty of possible scenarios, both hopeful and pessimistic.
On the bullish side, market experts point to all the work that needs to be done to repair the world’s financial capital, which will generate increased business.
"It will be sort of a postwar period. There will be a lot of rebuilding and there will be some new activity. There is going to be lots of work to do. And when there is lots of work to do, that’s good for business," said Susan Woodward, former chief economist for the Securities Exchange Commission.
On the contrary, others said Tuesday’s attacks could bode ill for businesses as corporations and consumers curb their spending amid their fears about the future.
"We have been dithering at the edge of an economic recession, and this could be the straw that breaks the camel’s back," said Gibbons Burke, editor of Markethistory.com, an Internet firm that sells market research to institutional investors.
Business has already been affected, as all air travel has been grounded while new security measures are put into effect, Burke pointed out.
"That is a significant economic cost that will show up in (third-quarter) gross domestic product," he said.
The market could swing either way in the near term, said Robert Shiller, an economics professor at Yale University who also specializes in investor behavior.
On the downside, Shiller said, "If no one wants to take airplane trips, and if businesses are in kind of a holding pattern and postpone initiatives and corporate investments drop, it could lead to a decline in confidence in the market."
But for the longer term, Shiller’s gut tells him to look on the side of history: Typically, the market has responded negatively to tragedies only for brief periods.
"The stock market tends to underreact to big events. … I think it will underreact again," Shiller said. "I don’t think this will be a huge disaster for the market."
Regardless of what happens early on, the pros advise caution.
"The market has already had a very good correction, but that doesn’t mean that the market is going to go right back up," said Woody Dorsey, president of Market Semiotics, a financial forecasting firm in Castleton, Vt. "It’s going to be tough here. We have to be realistic."
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