Stocks on the Warpath

Half a year following the terrorist attacks on New York and the Pentagon, the stock market has formed an eerily familiar rhythm. After starting with a downbeat, the Dow Jones Industrial Average has advanced precisely in step with the average pace of every war market since 1898: +10% over six months.

According to the editors of MarketHistory.com, this mote of trivia has important consequences for investors who insist on holding fast to fears that the market is bound to lose its bounce. The average 12-month advance of the Dow after a surprise attack on U.S. interests that leads to war is 13.6%, and the average advance after 18 months is 31%. If 104 years of history continue to support the market, then the Dow industrials would theoretically advance to around 12,486 by this time next year -- an 18% advance from current levels.

A move of that amplitude would be highly unexpected and perhaps unwarranted, but Gibbons Burke, editor at MarketHistory, came to this conclusion after an examination of six similar events: ...