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lilikoi's avatar

How do natural disasters affect the stock market?

Asked by lilikoi (10079points) January 16th, 2010

Do some companies’ stock soar and others tank? Which industries are most affected?

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8 Answers

Austinlad's avatar

I’m no financial expert, but I believe investors have so little confidence in the health of the national and world economy nowadays that they sell shares at the slightest hint of anything that might impact it negatively, and that pushes the stock market down. The reverse is also true—good news motivates shareholders to buy. As for natural disasters, specifically, I think stockholders fear, at least in part, that when our country announces it will contribute huge sums of money and manpower to disaster aid, it places a strain on our economy.

marinelife's avatar

It depends on where the disaster is and if investors and analysts believe that the market will be affected by the disaster. For example, after Katrina the market thought that shipping of gulf oil would be disrupted.

Fred931's avatar

I think you might see a significant drop if a natural disaster were to, say, take out every specific building and associate linked to a single company, i.e. if spontaneous tornadoes take out every single McDonald’s location, including main and subsidiary headquarters, then their stock would most definitely plummet to near zero.

Dr_Lawrence's avatar

Disruptions of the flow of goods and services, natural resources and the money supply are among the things that affect the stock markets.

To the extent that natural disasters and their fallout affect these things, so too are the stock markets are disrupted.

mattbrowne's avatar

Big one in Tokyo? Huge.

qashqai's avatar

Historically, natural disasters reduce near-term output while boosting economic growth over the long-term through reconstruction. This balance of positives and negatives tends to reduce their overall economic impact. This has been the case of Katrina, for instance.

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SecondHandStoke's avatar

Barack Obama, as a human, is of natural origin.

The stock market, unsurprisingly, fell upon news of his election.

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