World Events and the Stock Market – What Should You Do When the Unexpected Happens?

Does anyone remember the old Saturday Night Live skits with Gilda Radner as Rosanna Rosanna Danna?  Her famous line was, “It’s always something.”  Keep this in mind when the headlines scream about some unexpected world event (Brexit, anyone?) and the stock market takes a hit for a few days.

Even if the event itself is new, the economy has 100 years of surprises behind it.  Yes, the stock market hates uncertainty, but it also gets over it and moves on.  Investors need to learn to do the same.

Some examples:

  • June 23, 1950 – Outbreak of the Korean War – Immediate reaction:  12% drop, 6 months later:  19% gain
  • November 21, 1963 – Assassination of JFK – Immediate reaction: 3% drop, 6 months later:  15% gain
  • May 1, 1970 – Kent State Shootings – Immediate reaction:  14% drop, 6 months later:  20% gain
  • Sept. 15, 1992 – ERM United Kingdom Currency Crisis – Immediate reaction:  4.6% drop, 6 months later:  9.2% gain
  • Sept. 11, 2001 – 9/11 Terrorist Attacks – Immediate reaction: 14% drop, 6 months later:  24% gain

So as you can see, bad stuff happens every year.  Stock markets move in cycles regardless of the latest crises.  Stick to your diversified investment plan and tune out the noise of the news and you will be in better shape than those who panic and sell every time a new headline pops up.

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