Yesterday, we cited a WSJ chart showing market reaction to prior terror attacks.

Today, there’s yet another informative chart in the Journal (below). Here’s a quick excerpt:

"Terrorism continues to make investors cringe and to weigh on their optimism. But money managers sought to reassure clients that, terrible as the London events were, experience showed that they weren’t likely to have a lasting impact on financial markets. Analysts produced data showing that, following the bombings in Madrid last a year, financial markets recovered within days.

Investor concerns now focus less on the loss of human life and more on whether terrorism will cause a lasting disruption to society. The overriding fear in the investment community, often unspoken, is something on the level of a biological attack or a dirty bomb — a bomb laced with radioactive materials that would render sections of a big city uninhabitable — or a large-scale attack like Sept. 11, 2001. When confronted with smaller-scale attacks, investors tend to panic initially and then gradually begin going about their business again."

That pretty much sums up the psychology. We can now get into a debate as to whether this is a sign of what some analysts are calling "Resiliency," or what others (i.e.,  Dick Arms) term "Complacency."

Here’s that WSJ chart on how the markets traded yesterday (their graphics department is truly superb).


click for larger graphic

Wsj_07072005224851
chart courtesy of WSJ

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Source:
Markets Shudder, Rebound Quickly
By DAVID REILLY in London, SUSANNE CRAIG in New York and MICHAEL R. SESIT in Paris
THE WALL STREET JOURNAL, July 8, 2005; Page C1
http://online.wsj.com/article/0,,SB112077849749680179,00.html

Category: Markets, Psychology

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One Response to “More on Post-Terror Market Responses”

  1. royce says:

    Wouldn’t a better term for it be called ‘common sense’? The effect of killing a hundred (or even a couple of thousand) people in an economy made up of a few billion individual decision makers is bound to be small. How many people died in road accidents or murdered by regular criminals yesterday?

    Goods will still be traded, services provided, etc.