Wednesday’s Reaction
How will markets react as a whole? Before trading begins on Wednesday, we cannot know for sure, but already the U.S. currency fell as the market predicted that the damage of Hurricane Sandy will be lower than most expected. The dollar dropped because money started to flow into riskier assets, since the U.S. dollar remains the least risky asset on Earth for most investors.
Another indicator might be how other stock markets have fared, since other exchanges remained open. In Canada, stocks rose, as did crude oil and gold. The FTSE 100 rose nearly 1% and the German DAX rose over 1%, although both the Nikkei and Hang Seng fell slightly while the S&P ASX 200 rose by 0.20%.
What does all of this say about what will happen on Wednesday as markets reopen? While there is no guaranteed certainty, it seems that now, as people are initially reacting to Sandy worldwide, concern for the storm is limited. People are willing to invest in companies that either operate in America or depend on American companies. At the same time, several negative headlines on Bloomberg about the impact of Sandy on the U.S. economy and property values suggests that concern and worry could trigger a sell-off on Wednesday.
The conflict between the storm and the rising equity markets abroad might suggest higher volatility on Wednesday, but predictions should always be taken with a grain of salt. What this storm does demonstrate is that real life events can disrupt even the most carefully laid-out investment plans.