Jewish World Review Jan. 22, 2003 / 19 Shevat, 5763
Here we go again!
http://www.jewishworldreview.com | War talk is getting louder. Troops are being moved into the Gulf. Tensions are rising. Oil prices are spiking. And nervous investors resumed selling stocks this week. But if history is a guide, there may be reason for optimism.
By Friday, the Dow had lost 2 percent for the week. The Nasdaq had fallen 5 percent for the week. Still, both indexes are up 3 percent so far for the year.
"Clearly, there's a lot of nervousness about the Iraq issue," says Edward Yardeni, chief investment strategist at Prudential Securities. "I think at the end of last year coming into early this year there was maybe a more laid-back attitude among investors that perhaps war was not inevitable. That there might be a diplomatic solution or some other solution short of a war, like a coup in Iraq. But as we're approaching the president's State of the Union message, I think there's a growing sense that while war may still be not inevitable, it's becoming increasingly likely."
That sense of the inevitability of war grew after United Nations inspectors discovered empty chemical warheads in Iraq last week. Ironically, those warheads were found exactly 12 years after the start of the Gulf War.
It's just one of many parallels between that Gulf War and the present. A Bush is back in the White House. Saddam Hussein leads Iraq. And the economy is once again coming out of a modest recession, much as it was then.
Then, the stock market bottomed in October, then shot up in January, after the U.S.-led coalition began air strikes against Iraq. A month after the conflict began, the Dow had gained 17 percent. A year later, the Dow had surged nearly 30 percent.
Then, oil prices surged in the lead-up to war, hitting $40 a barrel. After the United States began bombing, oil had fallen back to $18 a barrel and stabilized. A year later, oil remained near $19 a barrel.
At present, the stock market also appears to have bottomed in October.
And oil prices have run up in recent weeks, much as they did a decade ago. This week, in fact, light sweet crude briefly went above $34 a barrel.
If the parallel holds, what could it tell us about the direction of our economy? Then, it took two years for us to feel better about the economy. President Bush had been voted out of office, and President Clinton was being sworn in - just in time to take credit for the recovery.
This time, we're facing a number of other challenges: the threat of further terrorist attacks on Americans here and abroad, continued sluggishness in corporate earnings and slow business investment.
After months of sluggish growth, it's frustrating to think we'd have to wait another year to feel the effects of what is already a stronger economy. But an optimist could point to another interesting parallel from a decade ago: Once the economy did pick up, it began what became the longest sustained period of economic growth in the nation's history. Let's hope history is once again prologue.
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