SEATTLE/ Conservative Monitor -- Will the stock market rebound after the significant decline after the markets reopened? There is no historic precedence to guide us on what will happen to the US economy and the stock markets after the attacks on the World Trade Center and the Pentagon, even though the press is quick to point out that the market has rebounded after other crises. That the stock market has rebounded in the past after a major crisis cannot be used as a guide to the latest event.

Crises that impacted the US stock market brought on by the military related events such as the Gulf War have occurred in other countries. (The exception was the attack on Pearl Harbor. The stock market did not rebound as it had for most other events.) Nonmilitary events that occurred in this country such as the Northridge California earthquake were primarily local. Even those of national significance such as the loss or fear of the loss of a president did not disrupt commerce in this country to any great degree. That changed with the World Trade Center and Pentagon attacks as air travel was shut down, including movement of goods, the military reserves were activated and many businesses were forced to cut back or closed for the week.

The US economy was in trouble before the World Trade Center attack. Consumer confidence was reported down and unemployment was increasing. Airport closings and cancellation of sporting and other events will have added to the economys difficulties. Layoffs that appeared to be easing before Tuesday are now increasing with the airline industry expected to layoff upwards to 100,000 people. We can expect even more layoffs from airline support industries and the accommodations and entertainment industries. While a recession may have been avoided before, the outlook was for several quarters, if not longer, of low growth. A recession appears almost certain with the recovery delayed.

Countries are finding their economies are more tied to events in the US than previously imagined. Europe and Japans weak economies were looking for a US recovery to lead a world wide economic recovery. Even countries that have supported terrorism, either directly or indirectly, are finding they are not immune from the fallout of the attack. While Afghanistan and Iraq may have had little to lose, Pakistan and other Moslem countries economies will certainly be impacted if the US economy contracts further. Foreign companies are suspending operations in many of these countries and withdrawing their expatriate workers over concern of a US response to the attack.

The airlines and accommodations industries were having troubles before this event. Travel and tourism will be impacted as people become cautious about vacationing, especially in Moslem countries. Egypt, Dubai and other Arab countries that depended on business travel and tourism will feel the changes. If world commerce slows, the oil producing countries of Saudi Arabia, Iran and other OPEC countries will see less revenue as demand for oil will decline and prices drop. Saudi Arabia and other Middle East countries that depend on US and European professional expatriates to assist in running their economy will see increasing costs to attract these employees.

The closing of the stock market and the relaxation of market rules will help stabilize the market and avoid a major collapse. The reduction of the discount rate on Monday, September 17 will help the economy in the long run but is unlikely to change the consumer's outlook of the economy or increase business investment immediately.

Businesses will find their borrowing costs reduced, but will banks extend additional credit? Consumer confidence was down even before the attack. With announced layoffs in the airline industry and the impact on other businesses, consumer confidence is unlikely to improve soon. The consumer will become hesitant to spend as uncertainty about the economy persists.

With business investment not expected to increase and consumer spending expected to contract, it is hard to envision a scenario that would result in a quick recovery for the US and world economy. The world stock markets will continue to decline over the next several months.

A stock market correction will offer investment opportunities, but be prepared for a slow prolonged recovery. Many companies will have disappointing profit reports. This will extend well beyond the airline and tourism industries. While the economy is basically strong and will improve, the recovery will take much longer than previously expected. Continued interest rate cuts will help but will take time. All that can be advised in this situation is patience and to invest in stocks that are below their intrinsic long-term value.