How The Stock Market Is Affected By Natural Disasters

Posted by Becoming Your Own Bank Advisor – Nick Drzayich

I just got done reading an article on msn.com detailing how the earthquake in Japan has caused US stocks to plummet.  The earthquake caused damage to a nuclear power complex that has been the site of three explosions, each explosion causing more of potential radiation hazard.

The DOW, S&P and Nasdaq indexes were all down significantly following the earthquake which is not welcoming news to those who have decided to leave their money in the market following the huge downturn in 2007-2008.  Just when you thought the market was making a comeback an earthquake comes in and takes away all your potential gains.  But wait, didn’t the allocation models and diversification portfolios see this earthquake coming?  Didn’t your financial planner look into his crystal ball and see the tsunami coming?

I think you get the point.  You simply can’t predict what will happen to the market no matter how many calculators and models you have.  Remember back about 2 months ago when Apple CEO, Steve Jobs, took some time off due to an illness?  Apple’s stock took a huge hit.  Having a negative return every few years has a huge effect on the overall performance of an investment – for more details on volatility you can watch this video

At the end of the day there are many uncontrollable factors that contribute to the gyrations of the market and nobody can predict the future. With that knowledge you may have a different approach when it comes to how much money you allocate for investment in the stock market.

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Nick D.

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