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:**
| Sector | Impact | Reason |
|--------|--------|--------|
| Financials | + | Higher net interest income |
| Technology | - | Higher discount rate on high-valuation names |
| Real Estate | - | Weaker demand as mortgage rates rise |
| Utilities | - | Reduced appeal as a bond substitute |
| Consumer Discretionary | - | Higher borrowing costs dampen consumption |

**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:**
| Sector | Impact | Reason |
|--------|--------|--------|
| Defense | ++ | Higher military spending |
| Energy | + | Commodity prices rise on supply concerns |
| Airlines | - | Higher fuel costs, weaker demand |
| Insurance | - | Geopolitical-risk reserves |
| Supply-chain related | - | Logistics disruption, procurement risk |

**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 semicon