Financial Advisor's Column
by Carmen C. Garcia, CPA
Terrorism and Financial Strategy
| Q: |
How is the World Trade CenterTerrorist Attackgoing to affect my money and my future? |
A: |
The most important things to remember is to follow your plan and listen to your trusted advisor. If you don't have a plan or an advisor, get one. Studies have shown that people who have an advisor average 17% more return on their investments then those who do not have an advisor and a plan. Panic occurs in people who do not have a long-term plan they feel confident about. Panic occurs mostly in people who do not have a Trusted Advisor to advise, guide and coach them. One of the reasons the emergency crews in New York City and DC were able to be effective is because they have not panicked. The reason they did not panic is because they had a plan of exactly what to do in the event of an emergency such as we've seen. As soon as the event occurred they put their plan into action. Wouldn't it be great to have a written plan so that no matter what happens with the market, the economy, or world events that you feel confident that you will be able to achieve your goals? |
| Q: |
Should I sell now and move to safer investments? |
| A: |
I have received many calls from friends and clients regarding the impact of recent
Terrorism on the financial markets. I believe that the stock market is and has been in the middle of a correction that may have some more downside to it because of
recent events. However, I think it would be unwise to make any significant
decisions regarding reallocating your portfolios because of these terrible acts. If
you have structured your portfolio with the appropriate amount of risk and
diversification you should not alter it. If you had a long term perspective and
were prepared to wait out the wiggles in the market for the long-term opportunities they present, then don't let these terrorists change your resolve and
your game plan. The market has been giving us months of more relevant data that
should have affected your positions long before Sept. 11. If you have not
reallocated or restructured your portfolio don't do it now. |
| Q: |
Is there any way to predict what will happen to my investments and to the financial markets because of the recent terrorist attacks? |
| A: |
No one can predict the future, however studying the past can be very revealing and can give you some indication of how financial markets react to events in Terrorism and Financial Strategy
similar circumstances. What follows is a Dow Jones table of Dow Jones
Industrial Average (DJIA) Performances after other historic disruptions. |
| Copyright 2001, Dow Jones Newswires |
| |
%Gain/Loss |
% Gain Days after Reaction |
| Crisis Event |
Reaction Dates |
Date Range |
22 days |
63 days |
126 days |
| Korean War |
6/23/50-07/13/50 |
-12.0 |
9.1 |
15.3 |
19.2 |
| Eisenhower Heart Attack |
9/23/55-9/26/55 |
-6.5 |
0.0 |
6.6 |
11.7 |
| Cuban Missle Crisis |
8/23/62-10/23/62 |
-9.4 |
15.1 |
21.3 |
28.7 |
| JFK Assassination |
11/21/63-11/22/63 |
-2.9 |
7.2 |
12.4 |
15.1 |
| U.S. Bombs Cambodia |
4/29/70-5/26/70 |
-14.4 |
9.9 |
20.3 |
20.7 |
| Arab Oil Embargo |
10/18/73-12/5/73 |
-17.9 |
9.3 |
10.2 |
7.2 |
| Financial Panic 10/87 |
10/2/87-10/19/87 |
-34.2 |
11.5 |
11.4 |
15.0 |
| Invasion of Panama |
12/15/89-12/20/89 |
-1.9 |
-2.7 |
0.3 |
8.0 |
| Gulf War Ultimatum |
12/24/90-1/16/91 |
-4.3 |
17.0 |
19.8 |
18.7 |
| Gorbachev Coup |
8/16/91-8/19/91 |
-2.4 |
4.4 |
1.6 |
11.3 |
| World Trade Center Bomb |
02/26/93-02/27/93 |
-0.5 |
2.4 |
5.1 |
8.5 |
| Asian Stock Mkt. Crisis |
10/7/97-10/27/97 |
-12.4 |
8.8 |
10.5 |
25.0 |
From the Wall Street Journal, Friday, Sept. 14, 2001, three days after the World Trade Center Tragedy
- Foreign stock markets largely rebounded from previous declines...
- The Dollar was stable
- The resumption of U.S. Bond-Market trading was orderly
- The Fed injected what was thought to be a record $70.2 billion into the banking system
- Japanese share leveled off after plunging 6.6% Tuesday.
- President Bush had an 88% approval rating from the American Public.
Here's the course of action I am taking, what I recommend to my clients and what I advise readers to do:
- Focus on your Financial Road Map, (where are you going and how are you going to get there)
- Reflect on your values and what's most important to you
- Affirm your resolve to achieve your goals
- Stick to your plan.
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Carmen C. Garcia, CPA, is President and Owner of C.C. Garcia & Co., P.C. a San Antonio CPA firm serving individuals, small businesses and non-profit agencies. Email carmen@ccgarcia.com or visit her website at www.ccgarcia.com.
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