I awoke Monday morning to news of the outrage that had taken place in Las Vegas the night before, and I experienced the now all-to-familiar feelings of weariness at the state of the world. There has been enough rehash of this terrible event, and my purpose of mentioning it was not further intrude on your peace of mind. There is a lesson to be learned here about how the market reacts to catastrophic events. Many of the financial commentators were truly amazed that the market didn't seem to be fazed by the horror that had transpired. In fact, the market rallied every day except Friday. The reason is simple: The market is a sociopath and has no empathy whatsoever regarding anything that does not directly affect it. An extreme example of this is the Bhola Cyclone that struck East Pakistan on November 12, 1970, eventually causing the death of about 500,000 people. It doesn't get much more horrific than that, but the chart below shows that the S&P 500 lost only -2.6% in a week, then it rallied into the year's end. Obviously, markets in Pakistan would have reacted negatively.
I could go much more deeply into this subject, but my purpose is just to get you thinking about the kinds of news events that are important to the market, and those that are not. How we personally feel about news is irrelevant, because the market probably has an entirely different point of view.
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