Hurricane Sandy Good for Wall Street… For Now

Recently I was reading the media coverage about the impact of the hurricane Sandy on the Wall Street shares. They all (Wall Street Journal, Reuters, Bloomberg etc) seem to converge on the same point – that Sandy was actually good for the Wall Street shares. Despite the fact that NYSE and Nasdaq shut down their operations for two days, the DJIA increased 59.10 points (0.45%) at 13,166.31. The Standard & Poor’s 500 Index increased 4.62 points (0.33%) at 1,416.56. The Nasdaq Composite Index rose 1.45 points (less than 0.1%) at 2,989.4. As in the case of Japan earlier this year, industrial shares were the highest gainers, on a Wall Street anticipation that re-building the coast area after Sandy will will actually increase the demand for their production.
The problem with these forecasts is that they are, well, just forecasts. And investors should be wary about these. Before they can reach to the market, the investment banks’ algorithms have already traded the shares increasing the prices. On the other hand, it all depends on who and how much will finance the re-building after Sandy – insurance companies have clauses in their policies against the so-called Acts of God, whilst the US deficit is bloated…

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    One comment

    1. Aram Durphy says:

      The key problem with these sort of forecasts is that short-term market movement is inherently unpredictable. You can have ten similar events, and get different market reactions to all of them. Thankfully, the market is mostly rational in the long-term, so investors can take advantage of short-term irrationality.

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