Some observers thought stocks would dive when the market opened for the first time after Hurricane Sandy brought much of the east coast to a halt.
Instead, stocks climbed when the market opened. By the end of the day, the S&P 500 was up, and the Dow Jones industrial average was down, slightly. What’s more, the big drag on the market appeared to come from Apple, not Sandy. The company’s shares (AAPL) were down nearly 9% on the heels of a management shakeup. Exclude that and the stock market would have been solidly up.
In early 2011, when the tsunami hit Japan the stock market dropped as much as 300 points on the Dow Jones industrial average. Then came the Arab Spring that kept the market from rising for the next few months. When the Europe debt crisis hit in the Fall, the market went into a full panic mode.
It’s likely that all of those things will end up being more significant events for the world economy than Sandy. But none of them happened here, dealing only glancing blows to the U.S. economy. Sandy will cost tens of billions of dollars to clean up and will slow commerce, in New York City at least, for months.
And yet, the market shrugged Sandy off. What does that mean? We have come a long way from just a year and a half ago, when it was believed that any little shock to the system, like a disruption in the Japanese supply chain or higher oil prices, would knock us back into recession.
Of course, the market could just be feeling optimistic. While we have made gains in the housing market and employment recently, they’ve been small, and uneven. Some economists have been worried that those gains could be fleeting, perhaps the result of short-term stimulus from the Federal Reserve. What’s more, the market, as we found out a few years ago, isn’t always the best predictor of where the economy is headed.
But the market is a good indicator of confidence. And confidence is key in a recovery. It motivates people to go out and shop, and companies to invest. What Sandy has shown is the confidence people have in the recovery, while it could be higher, is not as wafer thin as it was just a year and a half ago. We’re on stronger economic footing, even if that footing is temporarily underwater.