But despite the tragic losses suffered that day, the nation and its economy proved to be stronger than the adversary. Where enemies had hoped to engender fear and pessimism, they unearthed a powerful commitment to freedom and democracy. The terrorists also gave the nation a chance to prove its economic might. Today, the underlying strength of the U.S. economy enables investors to look to the future with confidence and optimism.

Looking Back
The attacks on the World Trade Center and the Pentagon struck powerful symbols of the country’s economy and military strength. Understandably, the stock market felt the aftershocks. On September 17, the first day of trading following the attacks, the Dow Jones Industrial Average fell nearly 700 points; by the end of the week, stocks had tumbled 14 percent. But the downturn didn’t last long. In the following weeks, the Dow began to climb again, eclipsing its pre-attack high in less than two months.¹

Robust consumer spending and low interest rates helped to bolster economic growth during the critical months following September 11. Zero percent financing on automobiles led to an 8 percent jump in consumer spending in October — not to mention a record for the greatest number of new cars ever purchased in a single month.^{2, 3}

Rising income levels and a strong housing market kept consumers spending and the economy growing through the fourth quarter of 2001 and into 2002. Although personal income dipped slightly in October 2001, it climbed steadily in succeeding months and is expected to surpass $9 trillion this year.⁴ Across the nation, house prices have skyrocketed, rising 42 percent since 1995.⁵

Moving Forward
During the first half of 2002, the economy again proved its resilience when corporate accounting scandals threatened investor confidence and depressed the stock market. Today, that wound also seems to be healing. Recent legislation has given corporate executives a unique opportunity to personally vouch for the integrity of their financial statements — proving to shareholders that they believe their reports to be accurate and honest.

In August, 695 of the nation’s largest companies were required to submit CEO-certified financial statements to the Securities and Exchange Commission. When the vast majority did so without making a single adjustment, shareholders took note, and the stock market began to show signs of renewed investor faith.⁶

In the past year, the economy has kept a slow but steady upward pace.⁷ Recently, the Federal Reserve changed its bias to “easing,” indicating a tendency toward weakness in the economy. But the Fed also expressed confidence in the economy’s underlying strength, citing robust productivity growth as an indication of future expansion.⁸

In its latest report, the Congressional Budget Office forecasted real gross domestic product growth of 1.7 percent for 2002 and 3.4 percent for 2003. Forecasts for corporate profits projected an increase of 2 percent this year and 9 percent next year.⁹

Certainly, the American people experienced irreparable loss on September 11. But one year later, government and private economic experts are making positive forecasts for the future. Their confidence in the economy gives investors all the more reason to look to the future with optimism.