Mike McGervey recalls the utter surprise of it all.
“Back in those days, you just didn't think about those kinds of things happening,” he said, referring to the 9/11 attacks.
The president of McGervey Wealth Management LLC in North Canton, Ohio, remembers someone walking into his office at the broker-dealer for which he was working at the time to say that the firm was closing for the day and sending everyone home.
Back then, the nation was more naive about terrorism, and news-driven events didn't have the market implications that they do today, he said. “We wondered how two holes in NYC buildings had anything to do with where we are in Ohio.”
In fact, there's been a major shift in the decade since the 9/11 attacks, he said, both in terms of how Americans think about their safety and in how markets react to news events.
“The terrorist attack was the beginning of a revolution for news and media, and somewhat of an evolution for markets that were once fundamentally based, but are now more news-based,” Mr. McGervey said.
The markets have moved away from the tenets of modern portfolio theory, which uses historical correlations to manage risk, to news-driven markets that cause dissimilar asset classes to move in tandem, he said. That shift has caused the firm to move to an investment process that uses cash to manage risk in lieu of modern portfolio theory.