International terrorism is a phenomenon that is polluting any economic activity. But perhaps what you don't know is that it has a very important impact on financial markets. To the point of being determining factor for values to rise or fall in the stock markets. This has been revealed every time there has been a major attack. Madrid, New York, London or Paris are some of the examples.
It can be said that terrorist attacks can have an impact on company prices even greater than macroeconomic data, business data and even corporate movements. It is one of the characteristics of equities since the beginning of the new century. Every time this scenario is generated, there is nothing more to check what it is the reaction of financial markets.
However, not all values behave the same. And at this point is the one that is going to influence so that it can help you channel investments in a much more correct way. Because international terrorism is a scenario that is called to stay with us for the next few years. And it will be convenient that know its incidence in equity markets. You will draw very striking conclusions from now on.
Terrorism: how does it affect the stock market?
The first after an attack, stocks around the world collapse, almost entering a stock market panic. With falls, without exceptions in all financial centers around the world, which at some times can exceed the psychological barrier of 5%. It is the moment in which the battle between sellers and buyers is settled by a resounding victory on the part of the former. Not surprisingly, the purchase orders are crowded in all the equity markets.
Subsequently, there is a moderation in these decreases, but without changing the general trend of financial markets. It is none other than clearly bearish, as is seldom generated from these economic commercialization centers. Despite the good prices shown by some titles. Especially the most punished by these events in society. It is very difficult to operate in it due to the strong feelings that many investors harbor.
Another very different thing is what happens a few days after an international terrorist attack takes place. The values are recovering from their strong crashes. Usually to return to the prices of before. Always based on the general trend of the markets. In any case, it will be the one that will determine its subsequent evolution in the financial markets.
What values are the most punished?
To gauge the intensity of these exceptional downward movements, it will be vitally important to check which equity sectors are most exposed to these widespread declines. Of course there are some more than others. And among the first, those of the tourism sector. Of any business nature: hotel accommodations, reservation centers, tour operators, leisure businesses, etc. They are the most disadvantaged in their price quotation. With falls that can exceed 10%.
These kinds of values are the great victims of the terrorist attacks. For a very simple reason. It is none other than his greater exposure to the interests of some countries linked to the terrorist plot. Also, all tourist flows suffer of these unfortunate events. You have to see that people travel less these days. As a consequence, the prices of listed companies are worth less money as their business lines go down.
To such an extent this issue is serious, that it is these companies that lead the losses in equity markets around the world. Not only in national markets. If you are positioned in any of these companies, have no doubt that during these days you will lose a lot of money. Another question will be if it will really be worth it sell the titles in the market or wait for events. It will be a very difficult decision that you have to make in these atypical scenarios in the world of money.
Other airlines of the losers
Another sector that does it much worse than others is that of public transport, and very especially that of the Airlines. The reason is obvious, as they are even prime targets for terrorist attacks. Faced with this scenario, its collapse in the stock markets is completely common. Far above other stocks and equity sectors. They affect all listed airlines, regardless of the geographic areas that their business covers.
They are not exactly safe haven values in the face of these adverse scenarios, but quite the opposite. His bearish process It draws a lot of attention to those people who are not used to trading on the stock market. Those who are in the financial markets are perfectly aware of their price movements in the face of any act of a terrorist nature.
They are values that should be avoided in certainly turbulent scenarios that require more defensive values with which to weather the instability of the equity markets around the world. Later it is difficult for them to recover the price positions to the events. But little by little, not suddenly. Therefore, they will be one of the values that will have to be paid more attention during these scenarios that are so worrying for society.
Companies with interests in the area
It is not only the securities directly exposed to these acts of terrorism that plummet in their prices. Also companies, from any sector, that have business interests in the areas of armed conflicts from which these terrorist acts originate. In this case, the list expands to various industrial groups. Low important percentages in the price quotation.
This select group of companies must also be closely watched in these processes of expansion of terror. But unlike the other sectoral groups, have an easier time recovering their prices. With a bit of luck, in a few trading sessions, prices at these events reach their quotation levels. The reason is because they come from strongly consolidated lines of business and with benefits in their business accounts.
In the Spanish stock market you can find some of these characteristic values. Generally from the construction, engineering, and public works sectors in general. In most cases they show a stability in their price quotation worth mentioning. And that is radically broken when there is a denotation of terrorists in the streets of Europe or the north of the American continent. In this case, there is no need to worry about its possible depreciation in the equity markets
10 Strategies that can be used
When a large-scale attack occurs, there will be no choice but to take a series of precautions in the investment markets. Some radically, and others designed more sparingly. In any case, savings will always have to be protected when this time comes. To achieve these goals, we give you some tips that will help you manage your investments from now on.
- Do not get carried away by emotions or nerves in these situations. You must keep your nerves under control so as not to harm your interests in the financial markets. You will have no choice but to look more to the long term than to the short term.
- If you don't sell your shares early in the trading session, you'd better meditate on the decision and postpone sales as the evolution of financial markets occurs. The analysis will be decisive for the strategy you are going to use in these very atypical scenarios.
- If your investment terms are long, it will be more prudent for you to keep in your positions. Not in vain, it will not cause you any inconvenience with so many months ahead. You can rest easy with your investment portfolio.
- If the terrorist scenario does not go away, it may even be a opportunity to take positions in the worst-hit stocks in equities. With very interesting bonuses to make the savings more efficient.
- If in any case your final intention is to sell the shares, the best strategy will be to formalize these operations in the price spikes. They will certainly occur, even with great intensity.
- You must bear in mind that there are also sectors of the stock market that can benefit from terrorist attacks. Among them those linked to the arms industry or security measures. They are revalued during these days with a large volume of contracting in their titles.
- Don't think that other financial assets are going to do better in these special scenarios. Just gold tends to develop upward movements of a certain intensity. It may be the opportunity for you to import this investment proposal.
- Also think that even if it is a very important drama, money always has alternatives to benefit. Not surprisingly, the world of investment does not understand feelings. You will have no choice but to take this approach.
- Do not stop during these days of check and analyze the behavior of financial markets. It may give you more than one clue as to what to do from then on. Both in one sense and another.
- And finally, try to learn from these situations to gain more experience to develop your operations in the equity markets. They may even be very useful for the next few occasions when events of a similar nature occur.