How Would the Market React to the Death or Capture of Saddam or Osama?

In my article "How Markets Use Information To Set Prices" we saw how various markets, such as the stock market, use the collective information of investors to set prices. In "How Would the Market React to the Death or Capture of Saddam or Osama?", Mutual Funds guide Dustin Woodard wonders what would happen to the price of stocks if Saddam Hussein or Osama Bin Laden were captured by U.S. forces.

My two cents: I think Woodard is right that it will cause a one to three day rally on Wall Street. I'm not sure if I agree that it will cause any long term changes in stock prices, however. I don't see the capture of these individuals having any measurable effect on the economy, unless their capture does one of the following:

• Decreases the likelihood for a terrorist attack and thus reduces the expense of security measures design to deter those attacks.
• Decreases military spending with an associated fall in taxes. Depending on the magnitude of the decreases, this could have a stimulative effect on the economy.
• Increases the quality of the economic policy coming from the White House by influencing the next Presidential election. It is likely the news would help the chances of Dubya's reelection campaign. Given the economic policies of the Bush Administration I don't see a second term for George the Second as being beneficial to the economy, but investors may see it otherwise.

In all likelyness their capture would probably have negligible effect on the economy, but could have great influence on the political future of George W. Bush.