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Why Airstrikes Dont Move Markets

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by Felix Salmon
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Mar 03 2008 12:00am EDT

Why Airstrikes Don't Move Markets

There's a lot of big news on the geopolitical front right now: Russia has elected a new president, Israeli forces have pulled out of Gaza, the US has launched airstrikes in Somalia. How come the markets can plunge in reaction to a consumer-spending survey, but they barely even blink when real news happens?

While the financial media often uses the markets as a good-news/bad-news gauge, that only really applies to news which directly affects corporate profits. Over the long term, geopolitical events can have enormous effects on markets, but those effects are rarely seen on a day-to-day basis. There are of course exceptions to that rule, such as oil prices spiking on Saddam Hussein's invasion of Kuwait. But generally speaking, market reactions to real-world events are visible only in the very long run.

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