• Mark Watson-Mitchell

What is a 'Black Swan' event?

A ‘black swan event’ is when an event or occurrence is extremely difficult to predict. Was Putin’s move difficult to predict – probably not – but its instance was so rapid that it took millions by surprise.

A black swan event generally results in severe and widespread consequences, although in hindsight the occurrence causes people to rationalise the event as having been totally predictable.

Examples of ‘black swan’ include the ‘dotcom’ crash, the ‘twin tower attacks’ in September 2001, then the 2008 global financial crisis when even Lehman’s went to the wall.

Brexit was a recent example, when the UK decided to leave the European Union – the effect was felt globally.

Even that was capped by the Chinese-based Covid-19 Pandemic. Two years ago, the markets collapsed as the potential horror of human losses began to be realised.

But as time passed it was seen that share prices had been oversold and that there were bargains abounding just waiting for the bold to seize.

It is never bad news for everybody – there are always winners emerging out of any such situations.

Yesterday's news that Vladimir Putin had declared 'war' upon Ukraine was one such example of a black swan - it knocked the equity markets globally by some 3% to 7% lower.

Within hours 'nosey buyers' were back into the market mopping up cheap lines of stocks that they had probably been following for months - the quick turns were there for the taking.

This event will, no doubt, be followed again fairly shortly but it may not be another black swan.

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