Stock market shows great resiliency
Sept. 24, 2001
KALAMAZOO -- The opening of the New York Stock Exchange on Monday, Sept. 17, precipitated a sharp drop in stock prices, but eventually leveled off with very encouraging results.
And although the week closed with record losses, the market behaved as expected. That's the opinion of Dr. James Schmotter, dean of the WMU Haworth College of Business.
"I think we've seen a remarkable set of evidences to show how strong our economy and our economic infrastructure is," Schmotter says. "We have gotten back to work. We have gotten back to some degree of normalcy much, much quicker than I had thought we would."
Despite fears that the attacks would plunge the nation into a recession, Schmotter says, the market behaved rationally in that some stocks that should have dropped did, such as airline and hotel stocks, while others went up. Investors didn't panic. One reason behind the market's quick revival was that no vital financial information was lost in the attacks, Schmotter notes.
"All of the major financial institutions have security systems in place," he says. "They have back-up server farms in secure locations all around the country. Everything was backed up. So we didn't lose any of that and we could get back to work."
Not everything is back to normal, however, Schmotter adds. The terrorist attacks have created uncertainty and shaken consumer confidence, which will delay revival of the sagging U.S. economy.
"The market hates uncertainty more than it hates tragedy," Schmotter notes. "Sometimes we think of the economy as this thing that sits out there. Well, in fact, the economy is the aggregation of millions and millions of individual decisions that people are making. And people like to have more certainty when they make decisions. So I think it's this uncertainty probably in the short term is going to make the market jump around a bit and delay the comeback that a lot of economists and market analysts were talking about coming later this year until sometime next year."
Media contact: Mark Schwerin, 616 387-8400, mark.schwerin@wmich.edu