Early Tuesday, we woke up to news both horrible and, unfortunately, increasingly common.
Explosions in Brussels rocked the city’s airport and a subway station close to the European Union offices.
The bombs killed more than 30 people and left some 250 injured.
[ad#Google Adsense 336×280-IA]The Islamic State claimed responsibility for the attack.
Terrorism’s ever-increasing presence has undoubtedly changed the way we live.
From security protocols to how and where we travel, the world is a very different place from the one I grew up in.
And changes have left many wondering if they should adjust how they invest…
My advice?
Take a page out of the recent history books and do nothing.
Stay the Course
Although the senseless act earlier this week terrified most of us to the core, the world’s stock markets remained calm, for the most part…
The immediate response to the twin blasts in Brussels in U.S. and European markets was to send stocks lower in early trading. France’s CAC and Germany’s DAX indexes fell as much as 2%. But after the early jitters and downward oscillations, the markets ended the day virtually flat. When the market closed, it was as if nothing had happened.
This is not unlike what happened after the attacks in Paris this past November. The French, U.S. and other world stock markets were down the morning after the deplorable events. However, this was short-lived. Stocks around the world quickly rallied and wiped out their temporary losses.
When terrorism takes place on American soil, despite a volatile initial reaction, its impact on the markets is fleeting.
On the first week of trading after 9/11, the S&P 500 lost 11.6%, and the Dow Jones was down more than 14%. Nearly $1.4 trillion was wiped out in just five days of trading. It was the NYSE’s biggest one-week loss in history.
Yet just one month later, the market was back at its pre-9/11 levels.
(Marc Lichtenfeld discussed the market’s reaction to historical catastrophes in an article [ on March 17]…)
History’s investment lesson is pretty simple: The best way to react to an unexpected attack is to not react at all.
Sure, travel and insurance companies take a hit, and they also take the longest to recover. However, it’s not the end of the world for long-term investors in such companies.
Don’t let the terrorists hijack your retirement. Terrorism can take a tragic toll on human life but, in the long run, it has little impact on the economy as a whole.
If your stop loss isn’t triggered, don’t fall for a “fear trade.” This is a knee-jerk reaction. History has shown time and time again that investors who resist the urge to panic come out on the other side.
Good investing,
Kristin
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Source: Wealthy Retirement