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Stocks Rally On the News of Bin Laden's Death, You Say? It's Not That Simple
On the morning of May 2, the financial headlines were abuzz with the news of Osama Bin Laden's death and its positive impact on the stock market: "Stock Market Celebrates Killing of Bin Laden" (The Wall Street Journal)
But despite a positive open, stocks closed lower on May 2. Undoubtedly, in the days ahead we'll hear analysts explaining how Bin Laden's death is not that "bullish" of an event, after all.
On that same note, MarketWatch.com ran an interesting story on May 2 that quoted from a research paper which found "little evidence that non-economics events have a big effect on the stock market."
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Had you anticipated precisely this event for 4Q 1987, you would have owned stocks for the biggest stock market crash since 1929. GDP was positive every quarter for 20 straight quarters before the crash and for 10 quarters thereafter. But the market crashed anyway. Three years after the start of 4Q 1987, stock prices were still below their level of that time despite 30 uninterrupted quarters of rising GDP.
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