Despite Attacks, U.S. Economy Said Sound

Watching the stock markets drop since the terrorist attacks on America last month has been disquieting to many investors. Combined with predictions that the U.S. economy is headed into a recession, some employees may have concerns regarding "the stability of the University's funds during this trying time," David H. Russ, treasurer and UC vice president for investments, has written.

To offer some perspective on the economy, Russ noted similarities to the Gulf War of 1991. With war looming in the summer of 1990, the S&P 500 Index fell 15 percent and the NASDAQ Composite Index fell 23 percent in two months, he said. In the next six months the S&P 500 rallied by 27 percent and the NASDAQ by 41 percent.

Concurring with Russ' view of the resiliency of the U.S. economy, Dan Hamilton, director of economics of the UCSB Economic Forecast Project, said he believed it "definitely will bounce back." The question, however, is the timing of the recovery.

Hamilton joined Bill Watkins, executive director of the project, in declaring that, after two quarters of flat or almost flat growth, the Sept. 11 attacks will push the economy into recession. "It looks like this time the recession will last longer than in 1990-91," Hamilton said.

Be that as it may, Russ argued that "in saving for our long-term needs, we should focus on long-term economic conditions and not on the short-term effects of such acts as this terrorist attack. Please be assured that we are working hard to ensure that UC's long-term investments are secure, and that we will continue to manage our investments with vigilance and care," Russ said.