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Markets can appear callous. On Thursday, the pound and euro rallied sharply, while gold and government bonds sold off after the killing of British lawmaker Jo Cox.
Even talking about this link will make some people angry, either with me or with investors who seem to be trying to profit from a tragedy. Two young children have been left without a mother and Parliament has lost one of its rising stars.
But one of the points of markets is that they are amoral. Not immoral—although much of the wrongdoing uncovered after the financial crisis certainly was—but unconcerned with morality at all. They are deliberately unfeeling, heartless and unsympathetic, because they exist to balance out millions of individual views in order to allocate capital and assess risk.
U.K. Lawmaker Jo Cox Dies After Attack
Jo Cox, a lawmaker from the U.K.'s main opposition Labour Party, died in an attack in her parliamentary constituency in the north of England. The assault prompted a halt to official campaigning ahead of next week’s referendum on the U.K.’s membership in the European Union. Photo: Zuma Press
There is no way to be sure what was on the minds of all those who traded on Thursday, but that balance looked pitiless to the point of cruelty. Markets had fallen sharply in the morning as worries about a possible British exit from the European Union, or “Brexit,” intensified. They had already bounced a little from their low before reports trickled in about the attack and both sides in the campaign suspended operations. But the pound and euro really took off, and gold fell as much as $23, after police announced Ms. Cox was dead.
The unsympathetic bet is that her death will convince more of Britain’s voters to stick with Europe, helping avoid the Brexit investors fear. Ms. Cox had been campaigning against Brexit, on Wednesday taking to a dinghy in the Thames with her family to confront a pro-Brexit flotilla sailing through London. Rumors circulated that the referendum itself might be postponed.
Ms. Cox may become a symbol for the remain campaign, or may not, but markets typically react first and worry later. With the pound up more than 2 cents against the dollar from its low to its high, it looks as though the collective wisdom of the market is that Ms. Cox’s death will play a significant role in the campaign.
Consider what happened when stock markets were reopened a week after the Sept. 11 attacks in the U.S. in 2001. Investors made a series of calculated, rational and extremely insensitive assessments: airline stocks immediately tumbled by a third, while shares in big defense companies jumped more than a 10th.
Tragic events prompt emotional responses from us, and so they should. But markets should not be criticized for coldly reflecting available information as they try to assess the state of the world; indeed, two of the major barriers to perfect markets identified by academics are emotional decisions by investors who often fail to assess all the information.
However, the individuals making up the markets need to remember their basic humanity while making those calculations, whether about a tragedy in a far-off land or one closer to home.
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Write to James Mackintosh at James.Mackintosh@wsj.com
Original article HERE.
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