Kensho Trade: Terror fears exit market quickly

Published Tue, Mar 22 201610:35 AM EDT

U.S. and European stocks traded lower in early Tuesday trading after terror attacks in Belgium's capital. A tough, but necessary reality for traders on Wall Street is that they need to adjust their asset allocation on these tragic events. How has the market traded in the wake of such attacks in the near and long term? As the table above shows, European stocks were weak initially and then much higher one week out after the Paris and Charlie Hebdo attacks last year, according to Kensho, a tool used by hedge funds to quantify historical events. And other than the Paris attacks last year, U.S. stocks are relatively unaffected and if anything, get a bit of a safety bid on the first day. "Unfortunately acts of terror are a part of everyday reality as citizens and investors," said John Petrides, portfolio manager at Point View Wealth Management. "The market immediately reacts and sells those stocks in the region where the attacks occurred and those sectors tied to consumer discretionary, particularly leisure and travel." Airlines and travel stocks fall the day of the attacks, but then rebound 30 days out, albeit slowly. A U.S. airlines index averages a gain of just 1.25 percent one month after the European terror events above, according to Kensho. An index of travel and leisure stocks in the S & P 500 typically rise 1.3 percent one month out, the data show. Read More Options strategies with Pete Najarian Here are some other observations we found about other asset classes using Kensho and applying it to European terror attacks: EUR/USD typically begins trending downward after attacks. Gold is not the safe haven some might have thought. Typically it is lower the day of, one week later, one month later and three months later. VIX spikes on the day of the attack, but is significantly lower one week later. We also ran the numbers on market moves after major terror attacks around the world going back decades. Overall, the market reaction to the tragic events is muted and then prove to be buying opportunities over the longer term. — With reporting by Deirdre Bosa and Giovanny Moreano Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.

Traders work on the floor of the New York Stock Exchange.

Brendan McDermid | Reuters

How has the market traded in the wake of such attacks in the near and long term?