We have a recession of unknown length and depth ahead of us. Companies continue to pound us with earnings damages blamed on the terrorist attacks of Sept. 11. And stock prices remain at historically high values relative to corporate earnings. Those are good reasons to at least keep your money spread around for the next five years and longer. But there also are compelling reasons to keep it at work in the market if you won t need it for five or more years.
Many experts say the depressed market already has taken into account an ordinary recession.
I also suspect that the current round of terrorism-related earnings warnings includes a bit of internal housecleaning. In short, managers are sweeping a few of their own sins under the convenient rug provided by the events of Sept. 11. That clears the decks for a quicker earnings rebound when it comes. There is nothing pretty about our equity markets these days. But if we keep an appropriate distance, it doesn t look so bad.