As I write this, Hurricane Sandy is making its way on shore somewhere in the New Jersey area. The stock market was closed in the U.S. on Monday and will be closed again on Tuesday. We’ll have to wait and see if it is open on Wednesday.
Why is the stock market closed? That is a question that I can’t really find a good answer for. I can only speculate on the reasons.
I could completely understand this scenario if it were 20 years ago or more. New York City was, and still is, the financial capital of the world, at least unofficially. However, the world we live in today is vastly different. It is a truly global economy. It is also a digital economy, particularly when it comes to finance.
Most stock trades that take place today are done through computers. The guys on the floor of the stock exchange, waving their hands in the air, just don’t matter that much anymore. This is why you can execute most trades through a few clicks on your computer. It is digital. You don’t have to call a broker and get him to send an order to the floor.
It is kind of strange to me that the two major exchanges in the U.S., the biggest in the world in terms of value, would shut down for two days because of a storm coming. This is not to minimize the power of the hurricane. It is also not to say that workers should go to work on Wall Street in the middle of the hurricane. The point is that the entire U.S. stock market should not have to close down just because a few people are going to be absent from the New York Stock Exchange and NASDAQ in New York City.
Most companies today, even smaller ones, have contingency plans. They have committees that identify employees who are in key roles. They often have branch offices that can fill in during an emergency. They have backup employees who can shoulder the load in the short term so that business can go on, at least in the critical areas.
I can only think of a couple of reasons why the stock market would shut down due to a forecasted storm. One reason is that the stock exchanges are simply unprepared. The other reason is that the big shots on Wall Street have a massive ego and want to pretend like the world can’t function without them.
This may seem a little harsh, but I really can’t see any other reason. I’m sure I can find many explanations that are offered about why the stock market can’t be open when Wall Street (the actual physical location) is shut down. But for every excuse, I just go back to the fact that most companies have some sort of contingency plan, usually in a branch office.
If anyone has any other valid explanations of this, please let me know. I would love to hear it.