IndexFunds.com Staff

History in Perspective - After the Storm

The stock market has recovered the more than $1 trillion in lost market cap value it had lost since the September 11th attacks. Despite the encouraging rally, many investors are understandably shaken by the terrorist attacks and a future clouded with uncertainty and new risks. A long list of fallen, television images of exploding bombs and violent protests, and the unimaginable threat of weapons of mass destruction on our own soil loom in every headline.

In times like these, we tend to look back on history to gain perspective and, if possible, learn from the mistakes of the past. And history tells us that America can bounce back after devastating losses and new challenges, and that panic selling never works. So as we close another quarter that has seen equity indexes plummet, let's take a look at our past and see if we can find something to be optimistic about.

The chart below marks several of the darker moments in our nation's history and how the Dow Jones Industrial Average reacted the next day, a half year later, and a year later. What we see gives us hope for the near future anyway.

Of course, some folks will say that we're involved in a new war with different rules that make the old comparisons obsolete. But if you look at the events on the list, Americans living in each period would say they were facing a new challenge that defied previous example. The only thing we can know for certain is that the next challenge will be different, because it always is.