I didn’t get to hear the entire story, which may well have answered this question, but I was surprised to hear the local news anchor declare last night that " The announcement of Bush’s address about the impending war caused stocks to soar on Wallstreet today." Why would the threat of war be good for the stockmarket? I’m finding it hard to understand how one bad thing (9/11) could affect the market adversely, but another could affect it positively. An explaination from someone with a better grasp of economics, please?
The markets hate uncertainty. Usually, your imagined worst-case scenario is much worse than the reality.
After 9/11, there were loads of unanswered questions, both large and small: Is this the beginning of a wave of attacks? Will WMD attacks follow? When will the markets open again? When they did reopen, they no doubt tanked for a while. This chart shows that the Dow did bounce back after getting hammered at first (other indices show similar patterns).
THe Iraq situation has been hanging over our heads for some time now. As of yesterday, a conclusion is in sight. Wall Street likes questions to be answered and uncertainties cleared up.
Also, many must feel that this war will be quick and effective. If it bogs down, the markets will tank again as they face the uncertainty of “When will this be over?”