Faith in America

There has been much talk about the effects of September 11 on the economy. Most pundits agree that an already shaky U.S. economy was pushed into recession by the terrorist attacks. Of course, it's hard to be sure because recessions are always designated after the fact. Most economists look for two consecutive quarters of declining gross domestic product before saying the economy is in recession.

Although it's not yet official, I can assure you that this is what a recession feels like. The economy was already slowing for some time before September 11. The terrorist attacks further rattled consumer confidence. Your local shopping mall may still look busy, but people aren't buying as much as in the past. Since two-thirds of the economy is driven by consumer purchases, a recession is all but inevitable.

How does this affect you as an individual investor? The most obvious impact will be readily apparent on your monthly account statements. Unless you are purely a fixed-income investor or a net short-seller of stocks, you have probably taken quite a financial hit. Prevailing economic conditions and expected near-term trends are generally reflected in current stock prices. When an unexpected economic shock occurs - and September 11 certainly qualifies - the markets react quickly and dramatically.

However, there is reason for optimism. Americans are a resilient lot. Every war has been followed by a period of peace. Every economic crisis has been eclipsed by an era of prosperity and growth. And every bear market has subsided, with stock prices eventually rising to record levels.

My message is simply to keep your faith in America and the U.S. economy. If you have a prudent investment strategy in place, this is no time to change it. If you don't have a sound financial plan, this is an opportune time to get one. Consumer confidence may have been shaken, but the American spirit will prevail. If the past is any guide, our country and its economy will emerge from these troubling times stronger than ever.

October 1, 2001

Back to Learning Center

Recommended Reading for Investors