The stock market’s response to the Paris attacks is depressing, and utterly predictable

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On Friday evening, terrorists attacked Paris, leaving at least 129 people dead in the wake of their actions. Another 352 were injured.

Soon after, French president François Hollande spoke about the tragedy and pledged to "lead a war which will be pitiless." On Sunday, the French military dropped bombs on what it described as ISIS-related targets. There was some tough talk about retaliation from other corners of the world as well.

On Monday, the first day of trading after the Paris attacks, companies that profit from war became more valuable. Shares of dronemaker AeroVironment closed up 5.8%, with military behemoths Northrop Grumman up 4.4%, Raytheon up 4.1% and Lockheed Martin up 3.5%. They all rose more than the S&P 500 Index, which was up 1.5%.


Wall Street analysts offered some sterile commentary to explain.

Stifel Nicholaus analyst Joseph DeNardi, for instance, predicted that the Paris attacks are "likely to bolster political support for defense spending" and that "2015 is the bottom of this cycle for defense industry revenue," according to a CNN Money article.


Perhaps most notably, shares of FLIR Systems, which describes itself as a company that creates infrared devices to "enhance perception and awareness," closed up 10.3%. On CNBC, Drexel Hamilton analyst Peter Skibitski noted that FLIR makes "security systems for facilities," mentioning the type where people were murdered in Paris: "Talk about soft targets—you know, concert halls, and soccer stadiums and whatnot."

Jim Cramer, the money manager and television personality, said he invests in Northrop Grumman and expects defense stocks to rise further. That's because France and its allies will have to bolster their military might with the help of private contractors in response to the attacks, he said.


"No one has an air force our size," he said, referring to the U.S., in an interview with TheStreet. "I think that others are going to have to build it up…so, yes, the answer is, I think those stocks go much higher."

Mark Bobbi, an analyst at IHS, was a little less certain in his comments to Investor's Business Daily, saying: "What would really affect stocks would be something incredibly big—like an attack on the U.S. that precipitates a full-scale response by the U.S. military. Something far beyond what we saw on Paris. But few people expect that."


Good grief.

There are lots of things that affect stocks, and it's impossible to say with certainty why any one goes up or down on a given day, or what it's going to do tomorrow. Apart from FLIR, the other stocks mentioned above have been broadly on the rise for months.


In that sense, investors appear to be putting billions of dollars behind the idea that there will be more security, more surveillance and more military action in the future. There's no calculation there on whether that's the right thing to do, and it's not a guarantee, but it's worth paying attention to.

I oversee Fusion's money section and have spent most of my time as a journalist writing about banks and finance. I live in Brooklyn with my partner Geoffrey & our two dogs, Captain & Tallulah. Favs: leopard print, Diet Coke, gummy candy, Ireland.

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