With the increase in horrific violence taking place across the globe, I thought it was pertinent to share this study completed by Ned Davis Research. While it’s disheartening to see what’s taken place in Dallas, Turkey, Baton Rouge, and sadly many other locations – the impact on the market has been not been as significant during past terror attacks. According to NDR in this Time article, the market has been resilient during previous times of violence.
Ned Davis Research studied the market’s reaction to 23 large-scale acts of global terrorism since the late 1970s, from the 1983 attack on Marine barracks in Beirut to the 2005 London train bombings. Three-quarters of the time, the Dow Jones industrial average was up within a month of the event.
In all but one case in which equities didn’t snap back quickly — a bombing in India during the global financial panic — stocks had recovered and were back in positive territory within six months.
Jack Ablin, chief investment officer at BMO Private Bank also notes that in the last 35 years there has not been a bear market that’s started with the occurrence of a terrorist attack. So while there is of course a first for everything and just because a 20+% drop in stocks has not previously followed prior terror-related activity, I think it’s important to look at what’s happened in history and to stay grounded to historical facts during times of heightened emotion that often are accompanied such tragedies.
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