Following the terrorist attacks, and with New York markets closed for three consecutive days, international equity markets are in for an extended period of turbulent trading.

Amid warnings of a possible global recession most market strategists agree one thing - it is still too early to call how the events of September 11th will affect the medium- to long-term performance of world equity markets.

While share prices may fall further retail investors are advised to hold on to their shares with some strategists even suggesting that canny investors may well find good buying opportunities ahead. But shareholders likely to need their cash in a hurry should weigh up their loss on selling now against possible greater losses on forced sales should the market fall further.

Before this week's slump most markets had been in a bear phase for some time. Markets hit their most recent highs between March and September 2000 and have been coming down with some blips since.

Over the 12 months to September 10th the London FTSE has fallen by over 25 per cent and European markets are down over 30 per cent. In the US the tech-heavy Nasdaq is down about 60 per cent while the more broadly based Dow Jones Index is down about 20 per cent. In Japan the Nikkei is down about 50 per cent.

Investors who bought in at or around market highs were already nursing heavy losses even before the terrorists struck. The market fall on Tuesday followed by some recovery on Wednesday and Thursday will have increased those losses especially for shareholders invested in insurance companies, airlines, hotel, leisure and luxury goods companies.

For many of these it may now be too late to sell - unless they believe there is a lot worse to come and see little prospect of recovery in the medium to long term. Selling now will crystallise their paper losses and they will be out of the market when a recovery starts. But if they expect to need cash in the short term they will have to weigh up the loss on selling now against possible greater losses if they are forced to sell over coming weeks.

Shareholders still in profit on their shares face a more difficult decision: should they take their profits now or risk staying in the market in the hope of better profits over the long term? Their decision will be influenced by their need for cash as well as their investment strategy - whether they invest for the short term or for the longer term.

With the US stock markets closed yesterday - the first time the New York Stock Exchange has closed for three consecutive days since the end of World War II - strategists are advising investors not to panic. But the message on the market outlook is still mixed.

"The lesson of past national tragedies and financial markets is that the nation is resilient and that financial markets reflect this resiliency. Those who panic immediately in times like this generally regret that decision later on. Financial decisions are always best made as free of emotion as possible," said Mr Mark Keller, chief investment officer for AG Edwards Asset Management in St Louis. But in a research note issued on Wednesday Goldman Sachs was cautious, saying the attacks had turned its European equities strategy "on its head" as they would deepen the economic downturn.

"The attacks in the US are likely to have an adverse impact on consumer and business confidence, deepening the economic downturn and postponing recovery," the investment bank said. Its strategy of building a portfolio based on market recovery was no longer appropriate, the bank said. The sectors to suffer most would be airlines, retailers, hotels, and leisure industries, Goldman said.

A check of six events in US history since 1898 shows the Dow Jones Industrial Average, the oldest US market benchmark, falls following a history-making event but typically rebounds within six months.

Based on historical trends "we could see some short-term instability, but the long-term outlook is bullish", according to Mr Gibbons Burke, an editor with MarketHistory.com which provides trading and statistical data. He studied the Dow Average performance, which includes the 30 biggest US firms, after six events affecting US interests since 1898. The events were: the sinking of the US battleship Maine on February 15th, 1898; the sinking of the Lusitania passenger ship on May 7th, 1915; the attack on the Pearl Harbor naval base on December 7th, 1941; the invasion of Kuwait by Iraq on August 2nd, 1990; the bombing of the World Trade Centre in New York on February 26th, 1993; and the bombing of federal offices in Oklahoma on April 19th, 1995.

A day after the event, the Dow Jones was down an average of 1.9 per cent, Mr Burke said. One week later, it had dropped by 3 percent. But then the average typically began to turn around - two weeks after an attack or bombing, the index was down an average 2.1 per cent, and within a month it was down just 1.6 per cent.

After six months, the Dow industrials were up an average 11.3 per cent, and a year later the benchmark had gained 18.4 per cent.

"In the near term, events like this cause near-term fear, panic, and economic disruption but that is when market bottoms are formed," says Mr Tim Ghriskey, head of Ghriskey Capital Partners, a money management firm for wealthy individuals.

"And usually a year later we have stronger and much higher financial markets as economic stability and investors return." At the two-year mark, the Dow industrials were up an average 30.7 per cent; at three years up by 50.4 per cent; and after five years up by 82.2 per cent.

The immediate reaction on international markets to the terrorist attacks was kneejerk and predictable. Sell orders piled in as markets already nervous about slowing world economic growth took fright.

Investors sold equities and moved to the traditional safe havens of gold and Swiss francs. The other traditional safe haven, the US dollar, succumbed to shock. Oil and defence shares were the only risers as concern about how and when the US would react led to fears of disruption of energy supplies and nervous talk about war. The news came in midday trading in Europe. As the sell response to the attacks started the obvious targets were hit hard - airlines, insurers and holiday and hotel companies.

Tuesday's sharp falls on equity markets were followed by some trimming of losses on Wednesday but markets remained volatile with insurance, airline and hotel shares still under pressure and were well down on the pre attack levels.

Central Banks are already pumping money into the markets to ensure liquidity is maintained and are prepared to cut interest rates to boost confidence.

The attacks have resulted in a huge increases in the perceived risk on world markets where confidence is the key to forward momentum.

In coming days and weeks the markets will watch for signals on the US economy and wait to see how the US reacts and the consequences of that reaction. The only sure thing is that markets are in untried territory and shareholders need to brace themselves for a bumpy ride.