Aaron Task
SAN FRANCISCO -- The stock market is scheduled to get back to business Monday, less than a week after tragedy struck Wall Street's literal and figurative heart and soul.
The resumption of trading is going to take a tremendous effort for all involved, both logistically and emotionally. But it will also prove comforting to some as a symbol of a return to some semblance of normalcy -- even if it's a long time before things return to normal, if they ever do.
As reported Friday, expectations are rising that liquidity injections -- and/or actual policy easing -- by the Federal Reserve, the loosening of corporate buyback restrictions by the Securities and Exchange Commission, and a sense of patriotism among investors and traders will buoy stocks Monday, or at least restrain the downside.
However, there's still a substantial risk investors won't find much comfort when stocks reopen. Friday's selloff in European equities, accompanied by a decline in the dollar and rally in defensive instruments such as U.S. Treasuries and gold had many reassessing the possibility of steep losses when trading resumes here. Such concerns were exacerbated by profit warnings Friday by General Electric (GE Quote - Cramer on GE - Stock Picks), which cited $400 million in losses at its reinsurance business, and Ford (F Quote - Cramer on F - Stock Picks), which cited parts shortages because of travel restrictions.
While it's impossible to accurately predict how trading will unfold, "it's a safe guess that it will be volatile," as Charles Schwab wrote Thursday on his firm's Web site.
As with many who advise retail clients, Mr. Schwab recommended investors mainly sit tight for now, and reaffirmed his faith in the market's long-term prospects. "Placing orders in a hasty or unconsidered way can be very risky," he wrote. "We can say with certainty that the extraordinary and tragic events of [Sept. 11] won't dictate market behavior over the long term. Over time, economic fundamentals will have much greater bearing on stock prices than the acts of terrorists."
Brian Belski, fundamental market strategist at U.S. Piper Jaffray in Minneapolis, Minn., deals mainly with institutional clients. Still, he struck a similar tone as Schwab in a note on Friday.
"More than ever, investors should remain calm and disciplined in their approach to investing over the next several weeks, as the potential for overreaction is high," Belski wrote. "Most decisions made in a panic tend not to be correct."
Certainly, the past 18 months have unmasked concepts such as "buy and hold" and "long-term investing" as mere bull market mottos. But the idea that those who aren't compelled by job description to trade should sit tight makes sense, at least until some discernible trend emerges.
Consider how emotionally debilitating it will be if purchases made early Monday for patriotic (or less altruistic) reasons are soon underwater. Indeed, some predict the market's fate will be to quickly retreat if it manages to rally when trading resumes.
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