Bin Laden gone, but retaliation could rock markets

Celebration over terrorist's death turning to concern about attacks by al-Qaeda cells

May 2, 2011 @ 7:46 am

By Liz Skinner

The immediate celebration over the death of Osama bin Laden has been tempered by the reality of possible retaliation against the West.

Bin Laden was killed by U.S. operatives after a firefight at a compound in Pakistan, President Barack Obama announced last night. The news comes almost 10 years after the Sept. 11 attacks on the World Trade Center in New York and the Pentagon in Virginia just outside of Washington.

But money managers fear increased terrorist acts by al-Qaeda, which Bin Laden helped found, could create uncertainty in global markets that already face unrest in Libya and others parts of the Middle East.

"Security threats may actually create an increase in global market uncertainty," said Mike Ryan, chief investment strategist for UBS Wealth Management Research Americas.

There's a potential for a surge in violence against western targets in retaliation for killing the Al-Qaeda leader, he said.

Indeed, Hamas leader Ismail Haniyeh denounced the U.S. killing of Bin Laden. “This is a continuance of the U.S. policy of atrocities,” Haniyeh told reporters today in Gaza City.

Certainly, investors seemed jittery today.The Dow Jones Industrial Average, which initially rose this morning on the news of the terrorist leader's death, was trading below its Friday close late in the day.

“This is a victory for the U.S., just less of one that might have been the case a few years ago, due to some fracturing within al-Qaeda,” Bob Doll, New York-based chief equity strategist at BlackRock Inc., which oversees $3.65 trillion as the world's biggest money manager, said in an e-mail to Bloomberg News. “Many bin Laden lieutenants have risen in the ranks. So while more than a symbolic victory, this does not kill al-Qaeda.”

The long-term market implications of bin Laden's death will largely depend on how the Obama Administration handles the news over the next coming days, said Andrew D. Goldberg, U.S. market strategist at J.P. Morgan Funds.

“Images of people celebrating in front of the White House are something that can get us in trouble with people around the world who don't like us,” Mr. Goldberg said.

He also worries about higher oil prices over increased Middle East tensions.

Financial advisers agreed positive buzz over bin Laden's death could be followed by more solemn months of fear and uncertainty.

“The positive impact in the way people feel now that this leader of terrorism is out of the equation is diminished by the risk of retaliatory events that could take place in cells around the world,” said Matt McGrath, managing partner of Evensky & Katz Wealth Management, which handles about $725 million in assets.

But not all advisers see it that way. If the U.S.’s strike on bin Laden is an indication of a tougher stance on all terrorists, it could help stabilize things in the Middle East and Africa, said David R. Kotok, chairman and chief investment officer of Cumberland Advisors. “There was no intention of taking him alive and that’s a message the U.S. has never made before,” he said.

If the Obama Administration sticks to this approach, Mr, Kotok said, it would “say to Gaddafi and to al-Assad that there is a boundary."

(Additional reporting by Jessica Toonkel. Bloomberg News also contributed reporting for this story.)

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