S&P 500 performance after terrorist attacks

The question

In this analysis, I examine the S&P 500’s performance in the aftermath of international terrorist attacks that not only instilled fear in Western markets but also triggered unexpected geopolitical upheavals, often culminating in military interventions over recent decades. These events, global in nature, transcended U.S. borders, underscoring their widespread impact. In this analysis, I also focused on interest rates (10-year bond interest rates) prevailing at the time of each event. This focus is instrumental in discerning the specific market conditions and financial climate in which these disruptions unfolded, providing nuanced insights into the market’s resilience or vulnerability in different eras.

Terrorist events

These events have been specifically selected for their pronounced impact on primarily Western markets.

 

1. The Munich massacre (Sep 5, 1972 – Sep 6, 1972)

2. Tokyo subway sarin attack (Mar 20, 1995)

3. Oklahoma City Bombing (April 19, 1995)

4. 9/11 (September 11, 2001 )

5. The bombings of the Madrid train system (March 11, 2004)

6. November 2015 Paris attacks (Nov 13, 2015 – Nov 14, 2015)

7. 2023 Israelis massacre (Oct 7, 2023)

 

 

S&P 500 performance after the events

Below is a detailed breakdown of the market performance, observed at intervals of 1, 2, 3, 5, and 8 weeks post-incident, corresponding to 5, 10, 15, 25, and 40 trading days, respectively.

Event Date US 10 year bond yield S&P500 on the day X PLUS 1 week PLUS 1 week (%) PLUS 2week PLUS 2 weeks (%) PLUS 3 weeks PLUS 3 weeks (%) PLUS 5 weeks PLUS 5 weeks (%) PLUS 8 weeks PLUS 8 weeks (%)
1. The Munich massacre (Sep 5, 1972 – Sep 6, 1972) 5.9.1972 6.46% 111.23 108.47 -2.48% 108.55 -2.41% 108.12 -2.80% 109.99 -1.11% 111.58 0.31%
2. Tokyo subway sarin attack (Mar 20, 1995) 20.3.1995 7.11% 496.14 503.2 1.42% 501.85 1.15% 507.01 2.19% 512.1 3.22% 528.19 6.46%
3. Oklahoma City Bombing (April 19, 1995) 19.4.1995 7.03% 504.92 512.66 1.53% 520.48 3.08% 524.36 3.85% 528.61 4.69% 537.12 6.38%
4. 9/11 (September 11, 2001 ) 11.9.2001 4.84% 1085.78 984.54 -9.32% 1018.61 -6.19% 1069.63 -1.49% 1068.61 -1.58% 1118.54 3.02%
5. The bombings of the Madrid train system (March 11, 2004) 11.3.2004 3.75% 1106.78 1122.32 1.40% 1109.19 0.22% 1132.17 2.29% 1134.61 2.51% 1098.7 -0.73%
6. November 2015 Paris attacks (Nov 13, 2015 – Nov 14, 2015) 13.11.2015 2.28% 2023.04 2089.17 3.27% 2080.41 2.84% 2077.07 2.67% 2021.15 -0.09% 1890.28 -6.56%
7. 2023 Israelis massacre (Oct 7, 2023) 7.10.2023 4.78%
Average performance -0.70% -0.22% 1.12% 1.27% 1.48%

Conclusion

Over the examined periods, the S&P 500 demonstrated a specific pattern in its performance following the terrorist attacks. On average, the index dipped by 0.7% after five trading days, slightly recovered to -0.22% after ten trading days, and then gradually climbed to post gains by +1.12%, +1.27%, and +1.48% after 15, 25, and 40 trading days, respectively.

 

These trends suggest that, except for the unique case of 9/11, terrorist incidents have not substantially or lastingly shaken the markets. This resilience, particularly evident beyond the immediate aftermath of the attacks, indicates that market forces may assess such events as having limited long-term economic impact. The outlier of 9/11, where the market reacted more sharply and negatively, can likely be attributed to the direct hit on significant financial infrastructure, apart from the sheer geopolitical shock and the human tragedy involved. This underscores that beyond the initial emotional and psychological shockwaves, the market’s behaviour is keenly tied to tangible impacts on economic structures and stability.

 

Additional resources

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