Nine Years after 9/11
Wells Fargo’s Chief Macro Strategist Gary Thayer recently wrote in a September 13, 2010 article entitled “The Week” that, “…we’ve been through a lot since the 9/11 terrorist attacks” including “…two recessions, two wars, a housing boom and bust, a spike in energy prices and the greatest financial crisis since the Great Depression.” While American businesses seem to have managed to handle this pretty well (Ex. after tax corporate profits are at an all time high), Thayer believes that American consumers are not as optimistic and that investor sentiment has taken an understandably big hit since 9/11.
This sentiment may account for the reason why major stock indexes have not advanced far from where they were at the end of September 2001. While this 9 year sideways movement may indicate higher investment valuations on the horizon, we, at Hennion & Walsh, have observed that there has been considerable research of late which illustrates that stock markets advance primarily in response to two key factors; 1) actual company earnings and 2) a risk premium – which is how much investors are willing to “pay” for the prospect of future growth.
Until a sustainable catalyst emerges, we believe a significant change in investor sentiment, which could lead to a higher risk premium, is unlikely.
We would also like to take this opportunity on this 9/11 anniversary to show our appreciation to the men and women of our military who serve our country, to protect the many freedoms that we often take for granted, each and every day.