Markets after disasters

From The Economist Daily Chart series. An interesting picture of how local stockmarkets reacted to the aftermath of a national disaster.

2011 Japan Earthquake – The Nikkei 225 – 17.5%↓
2001 USA Terrorist attacks – S&P 500 -11.6%↓
1995 Kobe Earthquake – Nikkei 225 – 7.6%↓

However while this earthquake was, to a certain extent, a forseen event – remember Japan has a history of earthquakes – the damage to the nuclear power station was not. Some commentators have likened this to a Black Swan – see previous posting: 2011 Black Swans. The Black Swan has three characteristics:
1. its unpredictability;
2. its massive impact; and
3. after it has happened, our desire to make appear less random and more predictable than it was.

One wonders if this disaster has given the US Federal Reserve a key reason to undertake further Quantitative Easing 3 (QE3)?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s