First a quote from Mark Hurlbert, MarketWatch.com, March 15.
It rarely pays to sell into a panic.
That’s worth keeping in mind today as panic grips global stock markets.
Perhaps the closest recent domestic analogy to what Japan is going through right now is the 9-11 terrorist attacks on the World Trade Center and the Pentagon. Just as is the case with the Japanese stock market, Wall Street plunged on the day it eventually reopened following those attacks.
But the market quickly recovered.
Second, two quotes from Financial Advisor Robert F. Cable author of “Investing on Autopilot: Strategies That Really Work and How You Can Profit From Them,” in Canada’s Financial Post. The first is from an essay Cable wrote following the 9/11 disaster.
“In every panic, the market will open way down initially. Please understand that you cannot get out before this happens. If you rush in to sell, you will most likely get a price that is around the worst of the day … In the past, those who got out did so to make themselves feel better. As time passed and they looked back, they wondered what they could have been thinking to sell at such low (panic) levels.
“In every case of panic, the market has recovered. I do not expect it to be any different this time. We have absolutely no control over what the market does. What we can and need to control is how we react to it.
“… I in no way want to minimize the impact of what has occurred. It has changed many lives forever. But it is unlikely to have a lasting impact on companies’ fortunes and thus on the stock market. History has shown us this on many occasions. The best thing you can probably do financially is nothing. Those who believe in stocks for the long run could even be buying.”
Mr. Cable added this post script:
“The last major earthquake in Japan, Kobe on January 17, 1995 saw the Japanese market decline about 25% bottoming in June of that year, five months or so later. Over that same period, the U.S. market (as measured by the S&P 500 Index) just kept powering higher.
“No two situations are ever identical but Japan then represented a much larger proportion of the world’s GDP and was much larger than China’s contribution. Today, China is larger than Japan. So if anything, the effect on world economies should be significantly less than the 1995 experience, all things being equal, which they never are.”
Our strategy, once again: Don’t sell into a panic. If you have any questions, call us.
