Terror And The Markets

Over the past couple of weeks we saw terror attacks in Paris, Nigeria, Tunisia, Mali, and Lebanon. A bomb took down a Russian airliner in Egypt and Turkish fighter jets shot down a Russian bomber they claim infringed on their airspace. France and Russia are on a bombing spree in Syria. The markets typically do not like uncertainty, but they have shrugged off this recent geo-political turmoil and have actually risen sharply in the past couple of weeks. It seems more attention is being paid to the expected boost in the federal funds interest rate next month.

If we look back at events like this historically we would see that the behavior we are experiencing now in the markets is common to how it has responded to previous acts of terror. John Kimelman published an interesting column on Barrons.com titled “Why are Markets Largely Immune to Terror”  

The attacks on 9/11 in the US were on a far grander scale than what we saw in Paris, but the markets only took a month to recover. Attacks may cause short-term disruption to economic life; people may decide not to visit town centers for a few days. But this generally means they postpone consumption rather than abandon it. 

Here is a look at recent terror attacks and how the markets have responded after 1 week, 1 month, 6 months, and 1 year.