Taking Stock: As War and Recession Loom, the Usual Rules Of Market Don't Apply --- Diplomatic, Military Moves May Say More Than P/Es In Days and Weeks Ahead --- Is This the Gulf or Vietnam?

• Published in: The Wall Street journal. Eastern edition
• Main Author: By Wall Street Journal staff reporters E.S. Browning, Susan Pulliam, Patrick Barta and Kortney Stringer
• Format: Newspaper Article
• Language: English
• Published: New York, N.Y Dow Jones & Company Inc 24.09.2001
• Edition: Eastern edition
• Subjects: Armed forces; Dow Jones averages; Investments; National security; Recessions; Securities markets; Stock exchanges; Stock prices; War; United States > US
• ISSN: 0099-9660

One who holds that view is Sir John Templeton, renowned for his pioneering moves into beaten-down stock markets outside the U.S. While Sir John says he's optimistic about the military and political situation, it's the stock market itself that worries him. Today, Sir John fears, the opposite is in place. At the time the terrorists struck, the companies in the Dow Jones industrials still traded at almost 25 times their earnings for the past year, and hadn't finished pulling back to a more normal level. Years from now, Sir John forecasts, U.S. stocks will trade at many times their current values, as the country continues to grow and prosper. But first, "it may be some years yet before we see the bottom of the American market." Richard Sylla, professor of economics and financial history at New York University's Stern School of Business, says he worries that the current situation could be less like the Gulf War and World War II, where the enemy wore a uniform and was easy to attack, and more like the Vietnam war or the Russian involvement in Afghanistan. If he is right, he fears, the U.S. risks getting bogged down in a quagmire, which would be terrible for stocks. He remembers what the stock market did during the Vietnam war.