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Markets unlikely to soar as in '91
By Jim Fuquay
Star-Telegram Staff Writer
Fort Worth Star-Telegram, March 21, 2003
World stock markets, which enjoyed a run-up in the past week as a U.S.-led attack on Iraq neared, settled into a mixed performance Thursday as investors pondered the course of the war.
The Dow Jones industrial average illustrated that ambivalence, falling more than 130 points early in the day, apparently in response to President Bush's comment Wednesday night that the war "could be longer and more difficult than some predict." But as news of explosions in Baghdad filtered in, stocks rallied to close at 8,286.60, up 21.15 points.
The Nasdaq composite index also rose, closing at 1,402.77, up 5.70. The Standard & Poor's 500 index rose 1.82 to close at 875.84.
Markets in South America, the Pacific Rim and London were generally up, while those in Germany and France showed losses. Virtually all those markets had been declining in the past month before starting to rebound about March 13, when war appeared inevitable.
"Around the globe, we were getting a sense-of-relief rally," said Sung Won Sohn, chief economist at Wells Fargo & Co.
But he said there are plenty of unknowns likely to produce substantial volatility in coming days, and he cautioned against assuming that the markets will recover as strongly as they did after the start of the 1991 Persian Gulf War.
"I do expect things to improve, but not as dramatically as in 1991. That's the most optimistic scenario you can paint," he said.
Some of that uncertainty was seen in the U.S. bond market, where interest rates slid Thursday after starting to advance a week ago.
"The war may be short-lived, but there's also a risk of future, longer-term turbulence," said David Motley, executive vice president at Colonial Savings in Fort Worth.
Jim Lacamp, senior vice president in the Fort Worth office of RBC Dain Rauscher investment bankers, said, "You're getting anxiety on both sides -- people who feel like they're missing the rally and people who are worried about the war."
Economist Bud Weinstein, director of the Center for Economic Development and Research at the University of North Texas in Denton, said the near-uniform movement of world stock markets "is a reflection of the economic integration that's occurred in the last several decades. These markets reflect economic conditions and expectations."
Before the crisis in Iraq heated up, he said, "all the major market indexes were down in the past three years. The global economy has all kinds of problems right now, and a quick victory in Iraq won't make them go away."
Consider this comment from Leigh Harrison, a fund manager at Credit Suisse Asset Management: "We feel that ultimately the market will come to focus on the economic situation, and it will find that life is still pretty difficult and getting worse for the consumer." Harrison was commenting on the British economy.
Sohn said, "Economic conditions are basically kind of wobbly."
Overcapacity in major industries and heavy consumer debt, as well as political concerns like terrorism and the situation in North Korea, will put a damper on economic growth around the world, he said.
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