25 Years On, 9/11 Illustrates Perseverance

Twenty-five years ago today, an evil tragedy struck, but a nation persevered. We will never forget what happened that sunny Tuesday, when black smoke from the Twin Towers darkened the sky. But we also celebrate how America’s society, economy and markets charged on as the great, everyday people of our nation linked arms and vowed to carry on. After quickly registering society’s shock and fear, markets fought back even while the nation was still grieving. That same gumption and free-market system propel our economy and stocks today, no matter how much naysaying you might hear on podcasts, social media, radio and cable.

When the planes struck the Twin Towers, Pentagon and an open Pennsylvania field that September morning in 2001, US stocks were almost a year and a half into the bear market that accompanied the dot-com crash. A recession had begun that March, and markets were just plain grim. When the New York Stock Exchange closed on September 10, markets were already down -27.2% from March 2000’s high.^[i] When it reopened on September 17, things immediately got worse. The S&P 500 fell -4.9% that day and lost -11.6% total between market close on September 10 and September 21.^[ii]

But then the sun gradually peeked through. A stock market rally began on September 22. The New York Yankees played at home for the first time since the attacks three days later, helping America heal with a national memorial service and our national pastime. Stocks rallied through their playoff and seven-game World Series run against the (victorious) Arizona Diamondbacks. They rallied through the war in Afghanistan’s start and early goings. They rallied through the ongoing Ground Zero cleanup. The recession ended in November, and stocks kept inching higher through December, until the pre-existing bear market’s drivers reared their ugly head again.

Which means it wasn’t all smooth gliding uphill in the months that followed. The bear market mauled investors in 2002 as markets dealt with the fallout from Enron and other accounting scandals, which led to the rapid passage of Sarbanes-Oxley—a massive overhaul to corporate reporting and liability rules that raised compliance costs and made life difficult for anyone wanting to run a public company. A new bull market began that October but entered a steep correction within months—ultimately retesting the bear market’s low—as war in Iraq went from rumor to actuality. But the new bull market regained steam in March 2003, and it ran on until October 2007.

Americans can—and do—debate everything that 9/11 gave rise to, from the Patriot Act to wars in the Middle East. But markets have triumphed alongside these societal debates, reminding us continually that stocks don’t think much about sociological issues. A sad truth of human existence is that there will always be wars and rumors of war. There will always be political disagreements, debates, protests and general angst. These things often tend to fade into the backdrop, letting stocks focus on humanity’s amazing ability to get on with life despite them. We the people keep going to work, caring for our families, paying the bills, taking vacations, putting in the hard yards and reaping the rewards via some occasional fun and leisure. All of this shows up in corporate earnings here and globally as people everywhere do the same. That, not the constant hum of bad things, is what stocks price in during bull markets.

Something else that has faded into the backdrop, for better or worse: terrorism. 9/11 sucker punched markets. But there is a sadly long list of terror attacks after it, and their market effects waned as stocks learned the drill. The lesson of 9/11 is that people carry on even after the worst of attacks, helping stocks scale and move past later bombings in Madrid, London and the Boston Marathon as well as horrific attacks like the Bataclan massacre, the Charlie Hebdo murders, the 10/7 attacks in Israel, numerous vehicle attacks in Europe and America and many more. Markets have learned how to deal with terrorism, price it and move on. Grim, but another testament to resilience.

That isn’t to downplay the tragedy terror strikes bring. Or to say they lack importance. We remember that day vividly and always will. Some of us have had the opportunity to visit the museum and memorial in Manhattan, and we can’t recommend it highly enough. But the tragedy and the American spirit are inextricably linked, and we think markets show that well. So we honor all those who lost their lives, we give thanks for all the first responders, and we celebrate our resilient country and markets.