I wanted to write to discuss the recent shocking attacks in the United States. Like you, I am horrified and saddened by these events.

At a time like this, it may be difficult to think about our personal financial affairs. However, there has been a great deal of speculation in the press about the effects this crisis will have on financial markets and you would be right to be concerned.

I will try to put this into perspective.

First, there is no doubt these attacks will add to the uncertainty and volatility on financial markets. It is also likely that these events will affect the global economy, which was already slowing down.

On the other hand, we should also keep in mind some other facts. Central banks such as the U.S. Federal Reserve, the Bank of Canada and the European Central Bank have indicated they will act to support financial markets. In fact, they have already injected billions of dollars into the world financial system. Additional interest rate cuts are widely expected. These actions will add stability to financial markets and help to stimulate economic growth.

Furthermore, history tells us that markets usually bounce back fairly quickly – often in a year or less – from similar political crises. For example, markets were down in the 1990-91 crisis that culminated in the Gulf War, but went on to rally strongly. These most recent attacks have not affected the underlying strength of the western economic system, which is what ultimately fuels the stock markets. Over the long term, financial markets have overcome many obstacles and patient investors have been rewarded.

In this regard, I have enclosed a chart showing recovery of the Dow Jones following major international events in the past 50 years.

Click Dow Jones Recovery to view its historic recovery.

You can see from this chart that while there is usually impact on the Dow Jones, there is always a recovery. And it appears that on aver is in excess of 12 percent. So, if you have a balanced portfolio and a long term approach, you can ride this event out. The worst thing you can do is “sell” in a panic market. Therefore, I urge you to stay the course and not to focus on the day-to-day fluctuations of the market. As long-term investors, we can concern ourselves with other important matters in our lives.

This article was compliled by John Klotz., B.A., CFP. John is a Certified Financial Planner with LMS Prolink. He provides financial counseling to over 600 clients. You can reach John and johnk@lms.ca or phone (416)-595-7484 ext. 305