When a terrible tragedy dominates the news, certain reactions are fairly predictable.
People change their Facebook picture to an image that conveys sympathy to the victims. Those with a political agenda push their political agenda. And those who make a living prognosticating about the stock market somehow need to show up and prognosticate about the stock market in light of the tragedy.
And so here we are the Monday after terrorist attacks killed 129 people in Paris, with analysts and experts rushing out to explain what the terrible event means for our investments, regardless of how short-sighted that might be. And yet bring it up they must because, let's be frank, there is great demand for these analyses even if the whole process makes people as uncomfortable reading them as the analysts are writing them.
Nicholas Colas, chief market strategist at Convergex, has a habit of explaining things well and his morning note probably offered the best justification we'll get for conducting business as usual:
It is never easy or comfortable to discuss capital markets in the shadow of human tragedy. Not easy, but necessary. Since the purpose of terrorism is to foster fear and disrupt normal life, doing your job as you would any other day is the only way most of us have to fight back.
So the talking heads deal a blow for the free world. Everyone knows that's ridiculous, but the idea of silence is probably too lonely and numbing. The breathless commentary helps fill the void of powerlessness many feel, or at least it offers a chance to redirect our attention into something other than checking the TV constantly for the latest death tally.
When it comes to the actual reaction of markets following similar tragedies in the past, there is good news and bad news. The good news? These types of events have become commonplace enough that markets tend to bounce back fairly quickly. The bad news? These types of events have become commonplace enough that markets tend to bounce back fairly quickly.
From the Sept. 11 attacks, to the Bali bombing, to the bombings of public transportation in Madrid and London in 2004 and 2005, Bloomberg's Sofia Horta e Costa and Oliver Renick reported on how national stock markets were able to bounce back within weeks, even if national psyches were damaged for decades.
On Monday in Paris, surprisingly, the resiliency proved to be even quicker. After dropping as much as 1.2 percent in the few minutes of trading, the CAC 40 Index soldiered back to end the session almost unchanged.
Most other European equity markets ended higher. U.S. benchmark stock indexes dropped at the open but were posting gains of about 1 percent by afternoon.
Should this be viewed as some sort of victory by the "stay-calm-and-carry-on" free markets over the barbarism displayed on Friday night in Paris? It may be tempting to think so, interpreting it as a signal that these attacks were isolated incidents and this will be all the terror we'll see for a while, according to the collective hive mind of the equity market, even if markets may have been due for a rebound after last week's ugliness.
Still, a closer look at the movers in the market suggests that the hive mind is a bit more cynical, taking a flier on oil producers on the chance that this beaten-down sector will benefit if geopolitical risks in the Middle East worsen. All 40 energy companies in the S&P 500 were higher, while nine of 11 airlines in the Bloomberg U.S. Airline Index fell.
Regardless of what the internals show, a positive close in the markets does offer one victory to celebrate: we can cease and desist with the awkward but mandatory exercise of trying to handicap the odds of another attack and its effects on markets.
Forecasting the next jobs number or the next move by the Federal Reserve's is hard enough; forecasting the next move by terrorists is a hopeless errand that no one should have to undertake too often. Perhaps silence is the best option after all.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Michael P. Regan in New York at firstname.lastname@example.org
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