Stock markets are far from the most important issue in regard to terrorist attacks, which are becoming a devastating staple of this current century. The markets do, however, offer insight into the working world and how much of an impact terrorism has on it. Terrorists likely intend to interfere in subtler ways with the everyday lives of those spared the immediate effects of their attacks. Have they succeeded?
For better or for worse, it seems the markets are becoming desensitized to terrorist attacks, as illustrated by this past Tuesday’s events in Brussels. This is better for the overall economic health of the world’s countries, yet worse because it indicates somewhat that these occurrences are beginning to become a societal norm.
On the first day of trading after the September 11 attacks, six days later on September 17, the Dow fell 684 points, a 7.1 percent decline. By the end of that week it had fallen over 14 percent, and it took a month to rebound to its pre-9/11 level.
Fast-forward 14 years to November 13, 2015, when the coordinated attacks took place in Paris. That day, France’s CAC 40 lost just 0.1 percent. Countless terrorist attacks have occurred between 9/11 and this instance, and the markets have learned to adjust. This past Tuesday, despite the Brussels bombings, the main indexes in France, Germany, and on Wall Street actually closed in positive territory.
Outside of perhaps the travel industry, the general consensus is that as the frequency of these attacks has increased, the shock value of them has lessened, decreasing “fear trade.” Additionally, consumers now tend to postpone purchases or trips in the wake of attacks rather than forgo them entirely, according to this Washington Post article. This CNN Money piece discusses how some consumers even shop in defiance of attacks, mentioning refusal of citizens to let terrorists dictate how they run their lives.
While markets have generally grown accustomed to these events, the potential for economic consequence still exists.
Recent attacks like those in Paris and Brussels have ignited a discussion for increased border controls throughout the European Union, which would impact the flow of goods in the region.
And there is further potential impact – despite British Prime Minister David Cameron saying it wasn’t “appropriate” to include the Brussels bombings in the referendum debate, campaigners for Britain’s exit from the EU (which is known as the “Brexit”) are underscoring them as a reason why Britain should secede. On July 23, Britain holds its referendum to decide whether or not it remains a EU member.
The global markets have largely adapted to terrorist attacks thus far. But if Europe’s economic status quo is destabilized by the fallout from these attacks (such as Britain departing), the markets may experience some turbulence.