What is it about disasters that makes markets plunge? I've never understood it. 9/11 I get, given that the finance world was directly affected. But Boston triggering a sell off? Or a fake WH attack? How can that have anything to do with financial markets?
Markets require a huge amount of legal and physical infrastructure to function, and investors understand this. Anything which might interfere with the enforcement of property or contract laws, or currency regulation, or transportation, or communication, or power will make investors very nervous.What is it about disasters that makes markets plunge?
I think it's the uncertainty associated with a disaster or tragedy: nobody knows what's going to happen, and thus, stocks are not the safest place to be - cash or gold is. Hence why traders dumped stocks and snatched up gold, it's much safer if you don't know what is going on.
So the logic is basically a fear that these terrorist attacks could destabilize things. People aren't certain would could happen, could we go into another war that might drain the economy, could it lead to changes in Congress, will people be freaked out and stop buying stuff? The whole stock market is propelled by what people think might happen, and when people aren't certain prices tend to drop. They might recover once people start to understand fully what is happening or they could continue to drop. Just remember, the stock market is not some mythical all knowing beast, it is made up of single actors trying to figure out how maximize their own profit. This can lead to good things, but it can also lead to people freaking out because they think people are going to freak out.