Everyone remembers where they were when the attacks of September 11, 2001 happened. I was at a conference in Montreal, watching CNN in horror as the Twin Towers collapsed, taking OppenheimerFunds’ headquarters with them. Fortunately, all of our employees escaped, though thousands of others tragically did not.
Has it really been 10 years? On the economic front, the U.S. has clearly had a lackluster decade. We were in a downturn when the planes struck. We then enjoyed a credit-fuelled boom and bust, and today we once again find the economy in the doldrums. The S&P 500 Index gained, on average, less than 1% annualized since September 11, 2001,[1] though we’ve seen periods of intense volatility. Meanwhile, yields on the 10-year Treasury have fallen to 1.97% from 4.81%, and oil has soared from about $28 per barrel to about $84.[2] Other, non-financial, indicators tell a similar story. The U.S. was running a budget surplus of 1.5% of GDP in the fall of 2001, while today we face a deficit of 8.4%.[3] Total public debt outstanding almost tripled to $14.7 trillion.[4] At the time, 63.7% of the civilian population was employed then, while only 58.2% has a job today.[5]
Investors continue to confront the European sovereign debt crisis, slow U.S. growth and persistently high U.S. unemployment. Sitting in OppenheimerFunds’ present headquarters across from the new World Trade Center complex, I find it ironic that all of us free-market capitalists have little choice but to wait and see what solutions various governments will propose to these problems.
Rather than be cynical, however, we should remember that the innovation that helped drive so much of the country’s success in the 20th century has continued unabated in the 21st. In 2001, nobody had ever heard of iPhones, YouTube or social networking, to name just a few inventions that have created hundreds of billions of dollars’ worth of value—and played an important role in the overthrow of several repressive regimes. Additionally, the past decade has been nothing short of revolutionary for emerging markets, which have assumed a vastly more prominent role in the world economy.
As I recently wrote in my weekly market review, over the long term, investors profit from the creation of economic value, not from political posturing or even blips in an economic indicator. All over the world, enterprising companies and individuals are building the leading businesses of the future. It is our challenge to look beyond the woes of yesterday and today, and focus instead on the great investment opportunities of tomorrow.
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[1] Source of data: Bloomberg 9/6/11. Note, the last day of trading before 9/11/01 was 9/7/01.
[2] Source of data: Bloomberg 9/6/11.
[3] Source of data: U.S. Treasury 9/6/11.
[4] Source of data: U.S. Treasury 9/6/11.
[5] Source of data: U.S. Bureau of Labor Statistics 9/6/11.