With violence erupting throughout Baltimore and looters vandalizing local businesses, Maryland Gov. Larry Hogan declared a state of emergency last week. The fact that local businesses have been hit hard is hardly a matter of debate, but with Baltimore’s biggest employers closing their offices last Tuesday, I wondered if this tragic event would affect the nation’s economy on a whole? Is the stock market affected by events like the Baltimore riots? If not, what events do effect the stock market? A national disaster? A presidential assassination? A terrorist attack? I decided to investigate.
John F Kennedy, 1963 Presidential Assassination
On November 22, 1963 President John F. Kennedy was assassinated in Dallas, Texas. After the shooting, the market stayed open for half an hour and then closed at 2:07pm EST. It remained closed until the following Tuesday. The Dow dived 21.16 points and the S&P plunged 2.8%. "It was a shock to the market," says Sam Stovall, Chief Equity Strategist at S&P Capital IQ and Equities.com contributor. "There was chaos and total uncertainty, from a political perspective.” This was one historic event that had a clear effect on the stock market.
September 11, 2001 Terrorist Attacks
A day our generation will never forget. September 11th is probably one of the most significant moments in American history, and the country grieved as 2,977 American lives were lost. After the attack, the US stock markets closed for the week. This affected the S&P, (it lost 11.6% in four trading days) and the Dow Jones (it lost 7.13%).
Hardest hit were the airline and insurance sectors. When trading resumed American Airline and United Airlines (the carriers used in the attacks) suffered major losses. American Airlines ($AMR) had a 39% decline while United Airlines (UAL) suffered a 42% decline. Although there were immediate loses, the American economy is known for its vigor and resilience and the market returned to pre-9-11 levels within the month.
Haiti Earthquake, 2010 Natural Disaster
This catastrophic magnitude 7.0 earthquake had at least 52 aftershocks and killed an estimated 230,000- 316,000 people. The earthquake caused significant damage and widespread devastation throughout Port-au-Prince as well as other settlements in the region. The day of the earthquake the S&P closed at 1,142, up ½ a percent from the day before.
Due to Haiti being the poorest country in the Western Hemisphere, the earthquake did not impact the American Economy. The earthquake actually provoked substantial donations to aid relief efforts. Many of these donations were made on credit cards, which in turn generated a $45 billion a yearinrevenue.
Baltimore, 2015 – Baltimore Riots
April 12, 2015, Freddie Gray, an African-American man, was arrested and taken into custody by the Baltimore Police. While in custody, Freddy Gray suffered injuries, fell into a coma, and died. By Monday April 27th, the city was in turmoil, ultimately resulting in angry rioters setting fire to cars and completely destroying and looting local stores.
CVS (CVS) was hit the hardest, and the store was shut down for two days while employees were evacuated from the riots. I found that, although local business were affected, it ultimately had little-to-no effect on the stock market overall.
Long Term Effects Tend to be Low
I have come to the conclusion that when a tragic events occurs (especially one that stop an entire nation) the stock market can be affected. However, the important thing to remember is the complexion of these tragedies rarely hurts your portfolio in the long term. So remember, the next time a tragic event happens do not allow yourself to getspooked and panic sell, because ultimately the market recovers within the month.
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