/scenario-analyzer

Headline Event Patterns

This reference documents the typical impact patterns that various event types have on markets. Use it during scenario analysis to infer future developments from past analogous events.

1. Monetary Policy Events

Federal Reserve (FOMC)

Rate Hike

Typical pattern:

• Immediate reaction (0-1 week): Equities dip temporarily, bond yields rise, USD strengthens
• Short term (1-3 months): Growth stocks underperform value stocks
• Medium term (3-12 months): Financials firm, real estate and utilities soft
• Long term (12-18 months): Economic-slowdown concerns may surface

Sector impact:

Historical cases:

• 2022 hiking cycle: Nasdaq -33%, financials relatively resilient
• After Dec 2018 hike: S&P 500 -9% (December), rebound the following January

Rate Cut

Typical pattern:

• Immediate reaction: Equities rise, bond yields fall, USD weakens
• Short term: Growth stocks outperform
• Medium term: Real estate and utilities recover
• Long term: Corporate earnings improve on stimulus effect

Caveats:

• Recession-driven cuts may initially come with falling equities
• Market reaction differs between an "insurance cut" and a "recession response"

QE (Quantitative Easing) / QT (Quantitative Tightening)

QE start:

• Strong tailwind for equities (liquidity injection)
• Benefits all risk assets
• Weaker USD, higher commodities

QT start:

• Headwind for equities as liquidity shrinks
• Especially large impact on speculative assets and small caps
• Tendency toward a stronger USD

European Central Bank (ECB)

Characteristics:

• Large impact on the EUR/USD exchange rate
• Direct impact on European bank stocks
• Peripheral-country spreads (Italy, Spain, etc.) are a key indicator

Bank of Japan (BOJ)

Characteristics:

• Changes to YCC (Yield Curve Control) policy have an extremely large market impact
• Impact on the yen carry trade
• Japanese equities (Nikkei) tend to rise on a weaker yen

2024 YCC adjustment case:

• Raising the 10-year yield cap → sharp yen appreciation, global yields spill over higher

2. Geopolitical Events

War / Armed Conflict

Typical pattern:

• Immediate reaction: Equities down, gold up, oil up, sovereign bonds up (flight to safe assets)
• Short term: Defense names rise, energy stocks firm
• Medium term: Impact on supply chains dependent on the conflict region
• Long term: Inflationary pressure, fiscal deterioration

Sector impact:

Historical cases:

• Russia-Ukraine conflict (2022): WTI crude over $130, European gas crisis
• Middle East conflict (2023): Red Sea route risk, higher shipping costs

Economic Sanctions

Impact pattern:

• Hits companies dependent on trade with the targeted country
• Commodity-supply concerns (when the target is a major exporter)
• Benefits to alternative suppliers

Tariffs / Trade Friction

Typical pattern:

• Immediate reaction: Equity market of the targeted country falls, related sectors sold off
• Short term: Earnings concerns for export-dependent companies
• Medium term: Moves to rebuild supply chains
• Long term: Progress of onshoring / friend-shoring

2018-2019 US-China trade friction case:

• Impact on China-dependent semiconductors and agricultural machinery
• Shift to Mexico/Vietnam to avoid tariffs

3. Regulation & Policy Changes

Environmental Regulation

Tighter carbon regulation:

• Beneficiaries: Renewables, EV, clean tech
• Hurt: Oil & gas, coal, airlines, heavy industry

Emissions trading:

• Rising carbon-credit prices → higher costs for high-emission companies

Financial Regulation

Tighter capital regulation:

• Higher bank capital-ratio requirements → pressure on bank profitability
• Larger impact on small and mid-sized banks

Crypto-asset regulation:

• Tighter regulation → hits crypto-related stocks, benefits traditional finance
• Regulatory clarity → can also be received positively by the market

Antitrust

Blocking large M&A:

• Share-price decline of the target companies
• Delay in industry consolidation

Big Tech regulation:

• Business-breakup risk for platform companies
• Benefits to competitors and emerging companies

4. Technology Shifts

AI Revolution

Beneficiary sectors:

Hurt sectors:

EV (Electric Vehicle) Adoption

Beneficiaries:

• Lithium, cobalt, nickel related
• EV charging infrastructure
• Utilities (higher demand)

Hurt:

• Legacy auto parts (engines, transmissions)
• Gas stations
• Oil refining

Renewable Energy

When policy support expands:

• Solar/wind related stocks rise
• Utility-scale storage demand

When policy retreats:

• Clean-energy stocks fall
• Capital rotates back to legacy energy stocks

5. Commodity Shocks

Crude Oil Price

Spike scenario (supply shock):

• Beneficiaries: Oil majors, shale companies, oilfield services
• Hurt: Airlines, transportation, chemicals, consumer goods

Crash scenario (demand decline):

• Beneficiaries: Airlines, transportation, consumer goods
• Hurt: Energy sector broadly

Thresholds:

• Below $80: Energy stocks soft
• Above $100: Inflation concerns, deteriorating consumer sentiment

Gold

Drivers of an increase:

• Geopolitical risk
• Inflation concerns
• Falling real interest rates
• Weaker USD

Related tickers:

• Gold miners: NEM, GOLD, AEM
• Gold ETFs: GLD, IAU

Copper

Role as an economic indicator (Dr. Copper):

• Rising copper price → economic-expansion signal
• Falling copper price → economic-slowdown signal

Related sectors:

• Mining: FCX, SCCO
• Construction / infrastructure
• EV (copper is a key material)

6. Corporate & M&A

Large Acquisition Announcement

Typical pattern:

• Acquired company: +20-40% (premium reflected)
• Acquiring company: -3-10% (dilution / premium concerns)
• Industry peers: +5-15% (speculation as the next acquisition target)

Large Bankruptcy

Systemic-risk concern:

• Spills over to the entire financial sector
• Widening credit spreads

Single-company bankruptcy:

• Benefits competitors (market-share gains)
• Hurts suppliers

Spin-off

Typical pattern:

• Parent company: uncertain in the short term, valued for slimming down in the medium term
• Spin-off company: tends to rise on post-independence growth expectations

Usage Notes

1. Past patterns are a reference: Reactions differ depending on the market environment
2. Consider compound factors: Analyze the interaction of multiple factors, not a single event
3. Importance of timing: Reactions change based on how much the market has priced in
4. Check the scale: Impact magnitude differs with the scale of the event
5. Periodic updates: Revisit patterns as market structure changes