When a dramatic news story breaks, the first question many investors ask is:
“How will this affect the stock market?”
It seems logical. But financial markets aren’t governed by physics. They don’t operate according to the action-reaction model.
Consider one of the most shocking events of the past century: the assassination of President John F. Kennedy.
Can you tell on the DJIA chart below exactly when that event happened? Maybe before that big drop on the left? Maybe at some other peak, causing a selloff?
The next chart shows the timing of the assassination. The market initially fell, but by the close of the next trading day, it was above where it was at the moment of the event.
Events do not dictate the trend of the stock market. Believing otherwise is one of the biggest mistakes investors make.
How DO we predict the stock market, bonds and gold month after month?
