Hurricane Sandy has entered the record books as one of the biggest natural disasters to hit the northeast. The devastating storm turned the nation's largest, most bustling city into a veritable ghost town—literally overnight. With no power for several days, angry crowds clamoring for gasoline, and thousands of homes flooded, the storm's aftermath has emblazoned images on our memory banks.
For us in the financial services business, the empty trading floor of the New York Stock Exchange on the Monday and Tuesday following Sandy's scourge was an odd and eerie occurrence.
History buffs may be interested to know that closing the exchange due to weather is not unprecedented, but most infrequent. The last time a weather-related event forced a 2-day market shutdown was the Great Blizzard of 1888.
This Great Blizzard struck the northeast in March of 1888, and it packed a wallop. With more than 50 inches of snow, snowdrifts of over 50 feet, and winds over 85 miles per hour, the Great Blizzard remains one of the most severe storms in U.S. history. While Sandy was well forecasted, folks back in 1888 had no benefit of foresight. As a result, Northeasterners were caught off-guard that early Sunday morning. Snow pelted New Jersey, New York, Massachusetts, and Connecticut, leaving many trapped in their homes for a week. With roughly one-fourth of the nation's population then living in the northeast, much of the nation was drawn to a halt. Sadly, that storm's death toll exceeded 400 people.
Back in 1888, information was not as quickly or as widely disseminated as it is today. Most of the country was unaware of the overall impact of the Great Blizzard until days, if not weeks afterwards. Economic theorists predicted that market volatility would increase after the Great Blizzard—the result of a heightened level of uncertainty regarding the storm's economic impact. While volatility numbers are fairly nebulous prior to 1926, we can look to the early Dow Jones Index for some interesting data points. The Dow Jones first published its list of "representative stocks" four years prior to the Great Blizzard. In March of 1888, the Dow Jones Index included 12 U.S. stocks, which at the time was comprised of 10 railroad companies and 2 industrial companies.
The Dow Jones 12-Stock Index closed at $80.01 the week before the Great Blizzard. During the two subsequent trading days after the New York Stock Exchange opened, the index remained virtually flat. However, over the subsequent 18 days, prices fell a total of -6.04%, hitting its low for 1888 at $75.28 on April 2, 1888. Twenty-one days later, the Dow Jones Index recovered its losses from the Great Blizzard. And, U.S. stocks went on to deliver a 14.88% return from the April low, giving investors a total gain of 4.80% for the entire year. Today, we see that in the days following the storm, volatility has been somewhat tame.
Some 124 years transpired between the Great Blizzard of 1888 and Hurricane Sandy. Certainly, Northeasterners would love to see at least another 124 years before the next great storm. And, investors take comfort in knowing that the stock market can reliably operate as planned, ensuring that willing buyers and willing sellers come together to agree upon their best estimates of fair prices. It is this ability for the market to remain open each weekday that allows for all transactions to occur in an orderly and efficient manner. This particular exchange, eloquent in its efficiency, is the life blood of the free-market system, enabling a free economy, run by a vast matrix of cooperation from individuals who collectively benefit from and contribute to this awe-inspiring system. That is the work of the capital markets. And, if once every 124 years, the market needs to take off a couple of days to recover from a terrible storm, the system, along with those who contribute to and benefit from it will endure. We are witnesses to the continuing resilience of human nature and dignity, free markets and capitalism.
 Chicago, Milwaukee, and St. Paul Railroad, Chicago & Northwestern Railroad, Delaware & Hudson Canal Railroad, Delaware, Lackawanna & Western Railroad, Lake Shore Railroad, Louisville & Nashville Railroad, Missouri Pacific Railroad,
Northern Pacific pfd., New York Central Railroad, Union Pacific Railroad, Pacific Mail Steamship Co., Western Union
Choquette, John. "The Great Blizzard of 1888.", March 11, 2012
Christiano, G.J. "The Blizzard of 1888; the Impact of this Devastating Storm on New York Transit."
Pierce, Phyllis. The Dow Jones Averages 1885-1980. Dow Jones-Irwin: Homewood, Illinois, 1982. From the IFA Library