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The Cuban Missile Crisis and the Stock Market
The Cuban Missile Crisis and the Stock Market
It was 46 years ago yesterday when the Cuban Missile Crisis ended. At the time, nuclear brinkmanship between the U.S. and the Soviet Union was so high that everyone thought we were going to bomb each other into oblivion (Remember Kevin Costner's line in Thirteen Days? "If the sun comes up tomorrow, it is only because of men of good will"). So how volatile was the stock market back then compared to today's rocky financial environment?
On Oct. 22, 1962, President Kennedy addressed the nation, making public the fact that the U.S.S.R. was installing nuclear missiles just 90 miles south of Florida. The next day, the Dow Jones Industrial Average actually traded 1.9% higher. For the next four business days until after the crisis ended, market volatility averaged 1.5% daily. Trade volume was up more than 27% compared to the daily average for the year.
Fast forward to today. Over the last six trading days, similar to 1962, volume was up 26% on average. But the market moved no less than 2% daily! The worst drop was 5.8% on the 22nd and the biggest gain was yesterday's 10.9%. All told, the average volatility over six days was 4.5%. That's 3 times as much movement now than during the Cuban Missile Crisis!
When I told my girlfriend this, she eloquently said, "I guess if everyone is going to die, then no worries, but if we all have to live in a hell hole, big worries."
Of course, there weren't credit defaults swaps back in 1962, or program trading, or online speculators. But it does provide a good measure on how crazy this market is right now.
Posted at Andrew Roth at 3:06 PM | TrackBack
It was 46 years ago yesterday when the Cuban Missile Crisis ended. At the time, nuclear brinkmanship between the U.S. and the Soviet Union was so high that everyone thought we were going to bomb each other into oblivion (Remember Kevin Costner's line in Thirteen Days? "If the sun comes up tomorrow, it is only because of men of good will"). So how volatile was the stock market back then compared to today's rocky financial environment?
On Oct. 22, 1962, President Kennedy addressed the nation, making public the fact that the U.S.S.R. was installing nuclear missiles just 90 miles south of Florida. The next day, the Dow Jones Industrial Average actually traded 1.9% higher. For the next four business days until after the crisis ended, market volatility averaged 1.5% daily. Trade volume was up more than 27% compared to the daily average for the year.
Fast forward to today. Over the last six trading days, similar to 1962, volume was up 26% on average. But the market moved no less than 2% daily! The worst drop was 5.8% on the 22nd and the biggest gain was yesterday's 10.9%. All told, the average volatility over six days was 4.5%. That's 3 times as much movement now than during the Cuban Missile Crisis!
When I told my girlfriend this, she eloquently said, "I guess if everyone is going to die, then no worries, but if we all have to live in a hell hole, big worries."
Of course, there weren't credit defaults swaps back in 1962, or program trading, or online speculators. But it does provide a good measure on how crazy this market is right now.
Posted at Andrew Roth at 3:06 PM | TrackBack
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