Stock Risks Poised to Rise in Changed Postattack World
Investing in stocks can be risky, sometimes very risky.</br></br>While that may seem obvious after the Dow Jones Industrial Average posted its worst weekly percentage loss in 61 years, of 14.25% (and its worst-ever weekly point loss, 1,369.70 points), it wasn't something that many investors probably spent enough time thinking about during the bull market run of the 1990s.</br></br>Now, with the Bush administration warning of a lengthy battle against terrorism, investors say that the risks associated with owning stocks -- as opposed to safer securities with more predictable returns, such as bonds -- are poised to rise. This is what analysts call a risk premium; as it gets higher, investors require a greater return from stocks compared to bonds.</br></br>For most analysts, it is not a question of whether stocks are riskier today than they have been for years. Rather, they are asking how much riskier? And for how long will this period of heightened risk continue?</br></br>"I am worried this crisis is going to be systemic in the sense that, at least for a while, it has changed the world," Barton Biggs, global equity strategist for Morgan Stanley, wrote in a report following the terrorist attack. "The risk premium for equities -- and maybe for all long-term assets -- is going to rise."