What 4 Financial Professionals Learned On 9/11
Even now, a quarter of a century after the 9/11 attacks, no one can forget that day. The towers collapsing, leaving downtown Manhattan choked in dust, smoke and rubble. The terrifying sense of being under siege. The incomprehensible loss of more than 3,000 lives, most of whom worked in finance.
For six days, Wall Street was closed. It was and still is the longest hiatus since the Great Depression. The financial infrastructure of the American economy was hobbled. And who knew for how long?
Yet incredibly, on Monday, Sept. 17, the markets reopened and trading resumed on the floor of the New York Stock Exchange, only about 3,500 feet from the fallen World Trade Center. It was a triumphant realization of NYSE then-chairman Charles Grasso’s bold assertion two days before: “We are very, very confident that come Monday morning the greatest capital market on earth will indeed be back in business.”
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Grasso was right, mostly. But it would take years before “back in business” would look anything like “back to normal.”
The markets took a steep slide that day, with the Dow Jones Industrial Average dropping just over 7%, deepening a bear market that began with the dot-com crash in March of 2000. But what nobody could anticipate was that the black swan event of 9/11, a tragic outlier in many respects, would soon become a driver of the so-called Lost Decade: A recession-recovery-recession rollercoaster that wouldn’t fully end until 2010.
“No one can predict black swans because, by definition, they’re unpredictable,” says Liz Ann Sonders, chief investment strategist with Charles Schwab, who witnessed the 9/11 attacks firsthand. “What you can control is whether your investments, and your temperament, can survive one.”
(Image credit: Future)
That perspective is as valuable now — amid AI uncertainty and Mideast troubles— as it was then. The markets have long since rebounded, of course, as the stock chart above (and many portfolios) show.
But the financial professionals who were there 25 years ago, like Sonders, absorbed specific lessons that go beyond the standard advice about staying the course.
In a series of candid interviews, industry experts shared their hard-won insights, distilled from one of the most challenging moments in history, about volatility, risk, resilience and the importance of being human.
Lesson #1: You can’t predict, but you can prepare
NYC Mayor Rudolph Giuliani, NY Gov. George Pataki, NY Sen. Hillary Clinton, firefighters and police officers ring the bell for the opening of the stock exchange on September 17, 2001.
(Image credit: David L Ryan/The Boston Globe via Getty Images)
Sonders remembers the morning of Sept. 11, 2001 in terrifying detail. “I was on a plane at Newark Airport, scheduled to fly to Los Angeles at 8:45 am,” she says. From her seat, Sonders could see the World Trade Center across the river in Manhattan, an ordinary sight on a clear day — until she saw a plane hit one of the towers.
“My ‘lessons’ from that period have never been abstract,” she says, “they became seared in my memories.”
In the tumultuous weeks that followed, Sonders had an epiphany. “The insight that has stayed with me through every shock since — the global financial crisis, the pandemic and myriad geopolitical flare-ups — is that the market’s job in a crisis is not to make sense,” she says. “It’s to price fear first and facts later.”
It sounds paradoxical, but Sonders’ insight came from witnessing investors’ real-time reaction to an almost incomprehensible situation. “When the stock market reopened on September 17th, the instinct to do something was overwhelming for many investors,” she recalls. “But the ones who fared best were those whose plans had been built before the crisis, not during it.”
Jim Shagawat, CFP, a partner adviser with AdvicePeriod in Paramus, N.J., has a corollary to that, which he’s often turned to since the days of 9/11 and the many times of market turmoil since then. “After an event like 9/11 — or the Great Recession, or the Covid crisis — there’s an impulse to want to prepare yourself for what’s next,” he says.
“But the real lesson is not to predict the next crisis, because it won’t be anything like the last one.”
In behavioral economics, there’s a term for the human tendency to believe the past will repeat itself: Recency bias. It can show up in a number of ways, but after a market shock, people’s focus naturally shifts to the rearview mirror. What just happened, how and why?
Hindsight may or may not be 20-20, but it’s a well-loved tool in the investor’s toolkit. It’s just more effective to trust the plans you’ve made with a cooler head than let the market be your guide.
Lesson #2: Put some faith in market infrastructure
Employees with an American flag in the Merrill Lynch office in their headquarters on the World Financial Center Equity Trading Floor following the September 11th terrorist attacks.
(Image credit: James Leynse/Corbis via Getty Images)
In her work with investors, Melissa Caro, financial planner, wealth manager and founder of My Retirement Network, an advisory and consulting firm in New York City, has a specific perspective she likes to impart to her clients. It’s an insight she traces back to the day the markets reopened after the 9/11 attacks.
Caro was then an equity trader on the buy side for institutional markets, providing liquidity to big financial clients like mutual funds and hedge funds. Though Caro and her colleagues on the trading floor were able to evacuate from their office in downtown Manhattan on the morning of Sept. 11, everyone knew someone who had suffered a loss. “When the markets reopened a week later, we were all in an emotional state,” she recalls.
Yet what also struck Caro that day was the mood among the big financial companies. Compared to the retail market, “I felt like the institutions were almost tiptoeing. There was a real sense of patriotism. No one was going to make a big move. ‘Don’t bet against America,’ was on everyone’s mind,” she adds.
In part, she says, that was due to the traumatic events that were still unfolding. But it also reflected the power of Wall Street’s institutions. “There was a recognition that you don’t unwind a position just because one thing happened, no matter how big or tragic it was. That’s not the M.O. on the institutional side.”
Some 25 years later, Caro often returns to this observation: Many investors don’t know, or don’t appreciate, that the markets they see reflected in CNBC headlines are part of a much wider Wall Street infrastructure.
It’s an article of faith that Caro believes can help investors remain calm in the face of even the blackest of black swans. “In a crisis, these larger players are not running for the hills, or putting everything in Treasurys,” she says. “So neither should you.”
To be sure, Caro’s takeaway isn’t to close your eyes and blindly trust the beneficence of the financial powers that be (see “Too big to fail” c. 2008-09). Rather, as Shane Tenny, a managing partner with wealth management firm Spaugh, Dameron & Tenny in Charlotte, N.C., puts it: “I remember when a colleague told me: ‘Help remind clients they’re not investing in markets. They’re investing in companies.'”
Tenny, who was a newly minted adviser working at a brokerage house during 9/11, says this distinction provided a meaningful reality check for his clients, and it gave him some much-needed ballast as a newbie adviser at a tough moment (and in the years since).
“It seems to help clients, particularly retired clients, move from an ethereal view of ‘the market’ being up or down — to the realization that they are a tiny shareholder of real companies, managed by real CEOs, who are working to create profits and sell their goods and services around the world.”
Being able to climb to 30,000 feet and look around has real benefits, Sonders notes. “Panic isn’t an investing strategy. And of course, neither is bravado.”
Lesson #3: Put together all the pieces of your plan
Residents walk by posters for victims of the World Trade Center outside the New York Stock Exchange on September 24, 2001, after the opening bell in New York.
(Image credit: STAN HONDA/AFP via Getty Images)
The counterpart to appreciating the machinery of the financial world is paying attention to the cogs and wheels of your own financial plan.
This was not a lesson Shagawat expected to learn 25 years ago, when he was in his early 30s and establishing what he hoped would be a career in corporate accounting. But when a close friend was killed in the 9/11 attacks, leaving behind a grieving widow and a two-month-old son, Shagawat offered to help get their affairs in order — and realized he’d found a more compelling line of work.
“I’d always studied the personal side of finance, even though my job was looking at P&L statements,” he says. “But helping my friend’s family was the first time I saw how deeply it mattered.”
For Shagawat, ‘it’ didn’t refer to abstract ideas of portfolio construction, but solutions to real-world dilemmas. “Here was a young widow with an infant son who needed answers to questions like, ‘Can I stay in my home? Do I have enough to raise my child? How do I make good decisions when everything in my life is upside down?'”
“What 9/11 taught me is that a crisis exposes whatever isn’t already simplified and coordinated ahead of time,” he says.
While Shagawat recognized that it was only natural that a young family wouldn’t have been prepared for a global tragedy, the real eye-opener, he says, has been the experience in the years since, “working with clients who think they have a plan — when really what they have is a collection of pieces.”
The essential task for most people, then, is to pressure-test their financial plans and take a more proactive approach to connecting those pieces as life evolves.
“Like a lot of planners, most of my work is with pre-retirees or people who are retired — all of whom have saved well, but they have a lot of moving parts,” he says.
“They’re thinking about retirement income, taxes, investments, sometimes company stock, insurance, estate planning, aging parents, adult children, their own longevity.”
Like an old-time clockmaker, there’s a need to fine-tune all these interlocking parts on a regular basis, he says. It doesn’t have to be a fire drill. “Just don’t wait for a crisis like 9/11 to show you how you wish things had been connected.”
Lesson # 4: Give your adviser a stress test
Traders in the soybean pit at the Chicago Board of Trade observe a moment of silence before the opening bell to mark the anniversary of the attacks on the World Trade Center on September 11, 2006.
(Image credit: Scott Olson/Getty Images)
One of Tenny’s vivid memories from 9/11, when he was in his late 20s and had only been in the advisory business for a couple of years, was the jarring awareness that it was his job to calm frantic clients — while managing his own reactions to those extreme conditions.
“I found myself emotionally pulled into the fear for my own family, my career, and the country,” he says. “At the same moment, our clients were saying to us: ‘What should we do?'”
It wasn’t just managing the fallout from that one global crisis, but maintaining his equilibrium as the dot-com crash fed into a bear market, which deepened with the 9/11 attacks, the collapse of Enron, the invasion of Afghanistan and more. “I was an adviser for four years before the markets were ever going up,” Tenny says. “It was a difficult time to earn your stripes.”
There is something to be said for the school of hard knocks, but Tenny acknowledges that “that was a long and nasty road.” It made him value those around him who modeled the ability to remain clear-eyed in the face of turmoil — and because of that he was able to draw another conclusion: Here was a skill that clients also needed to expect from their advisers.
“It’s an important thought exercise,” Tenny says. “Amidst all the discussion on what to look for in a financial adviser, rarely is there any suggestion about asking them how they deal with their own fear in times of stress,” Tenny notes. “My counsel is to find out: Does your adviser have the self-awareness to recognize their own tendencies when there’s a crisis?”
Given the recent World Cup excitement, Tenny can be forgiven for making a soccer analogy: Consider the dynamics of a penalty kick, when a player gets a free shot at the opposing goal from the penalty line, with only the goalie defending.
In many cases, Tenny says, FIFA analyses show that goalies often leap at the ball, a natural impulse. But the data suggests that goalies can also be successful blocking a penalty kick by standing still. “But nobody wants to look lazy,” Tenny says.
There’s a similar dynamic that can emerge between clients and advisers, he says. In a crisis, does the adviser feel pressure to make a move? Does the client add to that pressure?
“I think there is an implied expectation to deliver an answer, and it takes a unique humility to come into a client meeting where the adviser is expected to offer a solution — even though the best answer might be to do nothing.”
The cycles continue.
(Image credit: Getty Images)
The graph at the top of this story showing the potential growth of $10,000 over the last 25 years is meant to be reassuring, perhaps inspiring. But mostly realistic. The markets don’t always go up, as the financial professionals who shared their experiences here can attest. In fact, you can count on the downturns as well as the upswings.
It’s more useful to contemplate what’s embedded in that bumpy upward fever line. It’s woven from the experiences shared by the financial professionals featured here (and many more), along with brokers and traders and countless investors over time. And those stories will continue.
The terrorist attacks on September 11th, 2001, changed this nation as they changed the world.
But as Sonders summarizes: “Markets are ultimately a reflection of human resilience, and betting against that resilience over the long term has been a losing trade, even well before 9/11.”
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
