Osama Bin Laden’s Death & Your Money: What You Need to Know

Allison Kade
Posted

This Sunday was:

1. May Day

2. The day Hitler’s death was announced back in 1945

3. When millions of Americans finally put to rest a decade of anger and fear from Osama bin Laden’s continued evasion of U.S. forces

Bin Laden’s death will surely have far-reaching ramifications, including politics, the prevention of terrorism, and closure for the families of 9/11 victims—but you may be wondering about the connection between his assassination and the stock market rising all around the world, from France to Japan to Germany to the U.S., extending the longest rally for the S&P since January.

Learning From the Past

Traditionally, current events affect financial markets because investors are people too, meaning that they’re impacted by the same psychology as we are. They buy more things when they’re feeling relieved and clamp down when they’re feeling threatened. But studies have shown that non-financial world events are often mere blips on the record; even Pearl Harbor, Kennedy’s assassination, and other historic turning points have had only limited short-term effects on the stock market. It’s the larger trends following those events that will have the biggest impact: whether bin Laden’s death will actually limit worldwide terrorism, whether it could spark retaliatory attacks, and other long-term concerns.

How Bin Laden’s Death Affects the Markets

Yesterday, the S&P 500 surged in the morning. By the afternoon, however, those gains already started to fall apart, showing us that the effects of even big world events don’t last forever. Similarly, the cost of oil fell by almost 3% yesterday morning (because bin Laden and his followers believed in attacking oil production and distribution, which raises the price of oil, in order to hurt the U.S. and Europe; once he was out of the picture, prices dropped). By early yesterday afternoon, oil prices had already risen after the bin Laden-related dip. The moral of the story for many investors is that, though these short-term shifts feel very real to us while they’re happening, it pays to keep a bird’s eye view.

What This Means for You

The bottom line: World events happen. Some are good, some are bad, but many of them don’t have a lasting impact on the economy. If you see the stock market surge (or plummet) on certain news, think twice before changing the way you invest as a result. After all, investing should be a long-term process.

If you need to access your money within five years or fewer, keep it somewhere safer than in the market (like in a high-yield savings account or CD). But, if you’re investing for retirement, time will help mediate the ups and downs that the market is sure to take between now and then.

Want to protect yourself against wild stock market swings? Know your investing timelines and make sure that you invest in diverse enough things to protect yourself against as much risk as possible.

For more tips on how to keep your cool through tumultuous times, read this.

  • Erin

    Thanks, Allison. These are my favorite kinds of LV posts – the ones that help explain current events and economics.

  • Erin

    Thanks, Allison. These are my favorite kinds of LV posts – the ones that help explain current events and economics.

  • Meg

    What will really affect the stock market and prices of consumer goods is if there were some regulation on the greedy speculators, especially those controlling the price of oil.

    There is no shortage of oil, but the price of crude oil keeps going higher because of the speculators. Those few greedy investors are holding this country hostage, because as oil prices rise, transportation costs of the goods we purchase also rise, leading to higher prices of consumer goods.

    Not only that, but American car manufacturers have had no incentive until recently to design & build more fuel-efficient cars or look for alternative fuel sources. They keep pandering to the American dream of bigger, faster, better.

    Ironically, I owned a 1979 Datsun 210 hatchback that got 40 MPG. I bought that because I got married and moved further away from my job so I wanted a fuel-efficient car.

    I can still remember standing in line at the gas station in the early 1970s hoping I could get 10 gallons of gas for my car so I could get to work for the rest of the week. 10 gallons was the limit, and often the gas station would run out of gas before everyone was served. We also had alternate days to buy gas, depending on whether your license plate ended in an odd or even number. That was a real gas shortage.

    The oil companies and car manufacturers in this country have been in collusion for years. The first hybrid car was built in 1915, and in 1972 a prototype hybrid engine was installed in a 1972 Buick Skylark. In 1979-80 there were other experimental hybrid cars developed as well. Later on, the European & Japanese car manufacturers developed various hybrid vehicles.

  • Meg

    What will really affect the stock market and prices of consumer goods is if there were some regulation on the greedy speculators, especially those controlling the price of oil.

    There is no shortage of oil, but the price of crude oil keeps going higher because of the speculators. Those few greedy investors are holding this country hostage, because as oil prices rise, transportation costs of the goods we purchase also rise, leading to higher prices of consumer goods.

    Not only that, but American car manufacturers have had no incentive until recently to design & build more fuel-efficient cars or look for alternative fuel sources. They keep pandering to the American dream of bigger, faster, better.

    Ironically, I owned a 1979 Datsun 210 hatchback that got 40 MPG. I bought that because I got married and moved further away from my job so I wanted a fuel-efficient car.

    I can still remember standing in line at the gas station in the early 1970s hoping I could get 10 gallons of gas for my car so I could get to work for the rest of the week. 10 gallons was the limit, and often the gas station would run out of gas before everyone was served. We also had alternate days to buy gas, depending on whether your license plate ended in an odd or even number. That was a real gas shortage.

    The oil companies and car manufacturers in this country have been in collusion for years. The first hybrid car was built in 1915, and in 1972 a prototype hybrid engine was installed in a 1972 Buick Skylark. In 1979-80 there were other experimental hybrid cars developed as well. Later on, the European & Japanese car manufacturers developed various hybrid vehicles.