Egyptian turmoil felt in the Stock Market

3 02 2011

Sometimes it can be easy to forget how interconnected we are in this world. The political riots that occurred in Tunisia from December 2010 to mid-January which resulted in the ousting of President Zine El Abidine Ben Ali, seemed like an isolated event. Well it wasn’t, it helped embolden and inspire its neighbor Egypt, to do likewise. Daily riots have been occurring in Egypt since January 25th for several reasons including protesting corrupt politicians, grave economic conditions and the desire to have more personal freedoms.

What does this have to do with you? Why should you be concerned? First of all, it is wise to at least have an understanding of what is going on in the world around you. And more importantly, as I mentioned before, we are in an extremely interconnected world, where unrest in an individual country, like Tunisia or Egypt, can still make waves across the world.

These waves are felt in the world of finance as well… last Friday, all three major indices experienced the worst daily drop in months due to investors growing weary over the situation in Egypt.

Interestingly, there is an index that actually gauges fear in the market. It is the Chicago Board Options Exchange Market Volatility Index and is known as the VIX. It increased by 24% on Friday going from 15.94 to 20.04!

Egypt is an important country that controls the Suez Canal, one of the busiest waterways in the world. It makes sense that investors are nervous. The situation is so complicated and confusing, that it can be tempting to ignore it and assume it will go away. It has been over a week and the protestors in Egypt are going strong. Stay informed, be aware, and remember every little action, causes a reaction, even if it is an ocean away.

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