Four years ago today, terrorists flew hijacked airliners into the heart of New York City's financial district, aiming to kill civilians and strike a blow at the U.S. economic system.
In the chaos that followed, Americans mourned the loss of thousands of innocent lives, and stock markets were closed for four days — the longest shutdown since the Depression.
Markets were scheduled to reopen on Sept. 17, the Monday following the attacks, and nobody was sure what would happen. After all, the terrorist strikes came after 18 months of market losses in an economy that already was heading for recession.
The day before the opening bell rang once again, this newspaper published a story in which two local market experts shared their predictions about the return to trading.
Sterling K. Jenson, regional managing director for Wells Capital Management, said in that 2001 article that he was feeling "an overwhelming swelling of pride in our country." He expected volatility when markets reopened but predicted that a drop in interest rates and a burst of spending related to the crisis might jump-start the economy.
Brad Hansen, an investment adviser in the Salt Lake office of brokerage D.A. Davidson & Co., said at the time that he expected some people to panic and sell their stocks, but that such selling would be a short-term phenomenon. The mantra of buying low and selling high meant investors would be looking for a chance to purchase shares of good corporations at discounted prices, he said.
Four years later, both are able to look back and say they were largely correct. And while the stock market has not fully recovered — at least psychologically — from 9/11, they see reasons for optimism about the future.
When stocks finally started trading again on Sept. 17, 2001, they dropped. And dropped. And dropped.
The Dow Jones industrial average lost a record 684.81 points that day and fell to 8,920.70, its first close below 9,000 in 2 1/2 years. The Nasdaq dropped more than 115 points for a 7 percent loss.
By the end of that first week back, the Dow had fallen to 8,235.81, down 14 percent from its close on Sept. 10. About $1.4 trillion in shareholder wealth had disappeared, according to wire articles of the time.
The market bounced back a little, then dropped again, as the Dow hit a five-year low of 7,286.27 on Oct. 9, 2002.
Which was about what Jenson expected.
"We saw that volatility over the next few months, but I think we did see the economy itself start to turn with the spending that was unleashed," Jenson said last week. "We also got involved in war with Iraq. None of us could foresee the full impact of what that would be.
"I think what I said back then has certainly come to pass, but there are a lot of things that happened along the way that I didn't foresee."
Hansen said his prediction was based on experience with the October 1987 stock market crash, but he was surprised how weak the market was throughout 2002.
"I've concluded since then that there is still a significant discount in the value of the stock market because of the terrorism issue," he said earlier this month. "I believe the markets would be 20 percent higher than they are if the world wasn't having to deal with terrorism and terrorism issues. There is $5 trillion sitting in cash and cash equivalents today. That money is there because it's scared of risks."
Jenson said some people are drawing parallels between the aftermath of 9/11 and the economic stress now hitting the nation due to the devastation wrought by Hurricane Katrina. And he does see some similarities.
"Our hearts go out to the people affected by this, and for those in that part of the country, it is a severe retraction in their economic well-being," Jenson said, adding that he expects the national gross domestic product to take a hit in this year's third and fourth quarters due to the storm.
"But when you look at the infrastructure rebuilding in that part of the county, you will see an added positive benefit in 2006," he said, "and that helps underpin the economic recovery going into next year."
Despite such similarities, it doesn't appear that Katrina's rage has had the same impact on investors' psyches as the terrorist attacks of 2001.
"I think right now that the stock market has suffered about as many hits as it can from a psychological point of view," Jenson said, attributing many of its continuing problems to 9/11 in particular and terrorism in general.
"We're always looking around the corner for the next shoe to fall, and when people are in that mentality, they won't take the risk (to invest)," Jenson said. "They become very conservative. . . . We've been in that glass-half-empty mentality now for the last four years."
Hansen agreed that worries brought on by 9/11 continue to haunt the markets.
"I think the impact is still being felt today," he said. "I think it may be with us for the next 20 years. It's a new risk factor that the United States and the world hadn't really dealt with prior to that time.
"It may wane if we go five or six or seven years without a terrorist event. But I believe it's certainly with us today in the pricing of the market. . . . When I talk to clients, they're concerned about terrorism. They're concerned about Iraq. They're concerned about oil prices. Those things are all affecting people's interest in pulling money out of that $5 trillion hoard of cash."
Which doesn't mean this patient won't recover. After all, the Dow Jones industrial average is well above 10,000 these days, and Jenson said it is poised to go higher as the rate of growth in alternative investments — particularly real estate — slows.
"I think we're in for a pretty decent stock market move over the course of the next 12 months," Jenson said.
Americans are more aware now that they are part of a world community, he said, and parts of that community want to hurt the United States. That means people need to exercise some caution, but it does not have to shade every bit of their thinking.
"I think if, during the coming year, we start to pull troops out of Iraq, and we see the great humanitarian effort going on with those who have been displaced in Louisiana and Mississippi, there will start to be a swelling of pride again that we can handle ourselves and take care of ourselves, that we're a great country," Jenson said. "I think the psychology will start to turn positive."
And if that takes place, the terrorists of 9/11 will have missed at least one of their targets.
"The best is yet to come," Jenson said. "I always have that kind of positive outlook toward the future, especially when it comes to the stock market. . . . I think people just need to get back to that psychology again, that corporate America is a great place to invest."