BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific

BBC News World Edition
 You are in: Business  
News Front Page
Middle East
South Asia
Market Data
Talking Point
Country Profiles
In Depth
BBC Sport
BBC Weather
Thursday, 27 September, 2001, 15:14 GMT 16:14 UK
US investors struggle to hold their nerve
Nasdaq market site in Times Square, New York
Amid falling stock prices, investors are cashing out
David Schepp

The recent dramatic drop in US stock prices means many American investors have turned skittish, but some see renewed buying opportunities.

The figures for the year are staggering. Over one million US workers have been or will be laid off. The Dow Jones Industrial Average has fallen over 2,200 points. And the average mutual-fund investor has seen the value of his portfolio dwindle by a full 25%.

Charles Schwab  branch manager
Charles Schwab's Keith Huber says business is way up
A souring US economy further weakened by the recent attacks on the World Trade Center in New York and Washington has erased billions of dollars of wealth among US investors.

Many have reacted by pulling what remains of their worth out of stocks and mutual funds, further exacerbating a desperate situation.

Mutual funds cashed out

Analysts say the attacks could compound an already bad situation for mutual funds, which saw investors pull $8bn from those funds in August alone.

"It was steady but not super urgent," says senior research analyst Don Cassidy of mutual fund analysing firm Lipper.

It was, however, the largest drop since March, when investors sucked nearly $21bn out of mutual funds, hoping to cash out before stock mutual fund prices fell even further.

Analysts warn withdrawals during September could be just as bad in wake of the attacks.

"In the same way people are going to be cautious about going out and making big-ticket purchases in retail stores," Mr Cassidy says, "they are probably going to be thinking really hard about making an aggressive commitment to equity funds."

Cause for optimism

Despite the bad news, New York investors have in recent days and weeks responded enthusiastically to calls to invest in stocks - some no doubt as an emotional response to the attacks on their city.

Far north of "ground zero", where the Twin Towers once stood, near the renowned Rockefeller Plaza in Manhattan, a branch of discount brokerage Charles Schwab has seen a steady, substantial rise in its business.

Charles Schwab investor
This investor said he's been buying up "oversold" stocks
"We have opened a great number of new accounts over the past two weeks," says Branch Manager Keith Huber. "Our new accounts are up 30% to 40%."

Mr Huber says wise investors are reacting to the recent tumble in US markets to snatch up valuable stocks that are now undervalued.

"Individual investors see this as an outstanding opportunity," he says. "That has definitely increased our traffic."

Investors are bullish

Several investors spoken to agreed. One Schwab client named Greg said his investment perspective has not changed. "I've always been a bottom fisher," he said. "So I've always looked for the opportunity to buy low and sell high."

Another Schwab investor, Omar, said he is buying shares in anticipation of a rising stock market. "I try to buy more because the price is low, but it dropped more today," Omar told BBC News Online.

Despite the losses, he is holding onto his stocks because he believes the economy will rebound. "In the future, if I have more money, I will invest it in the stock market - absolutely," he said.

Indeed, it may require that sort of resolve to see the US stock market through these trying times. While analysts believe there are plenty of buying opportunities, volatility still remains a key component.

"There is continued uncertainty," says A C Moore, chief investment strategist at Dunvegan Associates. "We are not in a time where you see runaway markets to the upside."

See also:

21 Sep 01 | Business
27 Jun 01 | Business
17 Jul 01 | Business
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |