The Tel Aviv stock exchange index (TA: TA35) is down 6.5% today, Sunday. The Stock Exchange itself (TA: TASE) is down a little over 8%. These are about the right economic reactions to the vileness going on presently. For while the violence is of course intensely important to those suffering it in the economic sense this simply is not a large event. Hundred, perhaps thousands, injured and dead. No, leave aside blame and who did it and all that. This is of course - by very definition - life ending for those suffering it. But in a country of 9 million, an economy of near $500 billion, this is not an important economic event.
We’ve all seen bigger movements in a stock market index over changes in interest rates.
Tel Aviv stock market index from Google Finance
Tel Aviv Stock Market stock price from Google Finance
It’s entirely possible to think of this comparison being made as being in itself vile. Even, in several senses it is. To be thinking about money or stock markets as a small scale war is breaking out. But that market reaction is also telling us something. As prices in markets always do tell us something. We might not like the information from prices in markets but they are, but always, that information.
Current events are worth 5 to 10% off the value of the largest listed components in the Israeli economy. That’s all. There will be some diversion of resources to deal with these events. Please, note we are not saying nor advocating any specific set of actions. But the economic effect, the damage to the economy as a whole, is the sort of thing that just is not of major importance.
Something worth remembering on a longer term basis. Economies are really, really, big things. It takes an awful lot to damage one.