For a nation that became enamored of the stock market over the last decade, investing seemed a trivial, even forgotten pursuit, over the last week. Yet as the market prepared to reopen after a terrorist strike to the heart of Wall Street, investors faced an unavoidable question: What should I do now?
Precedents are of limited value. Bullish advice may be dusted with patriotism, bearishness exaggerated by fear. So many professional investors and money managers are retreating to the most basic kind of guidance: Hold tight.
On his brokerage company's Web site, Charles Schwab has maintained the same message since Tuesday: "Invest for the long-term" and "keep your cool during the rough times.'"
Similarly, John Brennan, chief executive of the Vanguard Group, the nation's second-largest mutual fund company, wrote on his firm's Web site, "Regardless of how the financial markets respond to the news of the day, investors rarely are well served by hasty decisions."
Some experts sought to divine the immediate prospects for stocks by examining investors' responses to past crises.
A study by Ned Davis Research of the market's reaction to 28 crises from 1940 to 1998 -- events like Pearl Harbor, the assassination of John F. Kennedy and the start of the Persian Gulf War -- found that the Dow Jones Industrial Average initially fell about 5 percent. But after about four months, the Dow rose 5.1 percent.
Citing the study, Keith Banks, chief investment officer for Fleet Asset Management, said, "I'd be surprised if we didn't see the markets open down 5 to 8 percent out of the box. That'll be a knee jerk." He added, "At some point, people will step in and begin a buying process."
There have been few signs of panic. Activity at Fidelity Investments, Schwab and Vanguard has been exceedingly light, the firms said, with most customers seemingly preoccupied with the news.
There are forces at work that could increase the chances of a rebound. Vice President Dick Cheney, on television on Sunday, urged Americans to "stick their thumb in the eye of the terrorists" by maintaining "their normal level of economic activity."
The Securities and Exchange Commission said last week that it would temporarily ease restrictions that limit companies and executives from buying shares of their own stock. And many analysts expect that the Federal Reserve will quickly cut interest rates again.
Meanwhile, in e-mails and on message boards, a grass-roots campaign is under way, best summed up by one of the electronic messages: "Fight back. Buy stock."
Many of Wall Street's most prominent forecasters -- the likes of Abby Joseph Cohen of Goldman, Sachs and Thomas Galvin of Credit Suisse First Boston were silent last week.
Among those who did speak out, there was obvious concern -- partly because the world's major economies were already weak, partly for fear that Sept. 11 was only the beginning of a period of volatility.
"A global recession had, hitherto, been averted by the resilience of the US consumer," said Edward Kerschner, chief market strategist of UBS Warburg, in a note to clients on Wednesday. "But sadly, such resilience will be severely tested over the coming months."
For certain sectors of the stock market -- airline stocks, for example -- the concerns are obvious.
Other industries are expected to suffer, too.
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