And just like that it seems we go from embarrassing, misspelled, grammatically incorrect tweets which just irritate both allies and haters to real missiles being launched at our enemies and friends. Among other worries, you might wonder how the U.S. getting involved in an armed conflict could affect your investments.
As always, when predicting the stock market’s reaction to current events, my answer is a confident, “I don’t know.” But we can look to history for some ideas.
Total War and Not-so-Total War
First, there is a difference between total war and not-so-total war. In a total war (such as World Wars I and II), the government will ramp up spending and encourage (or force) industries to shift production to support the war effort. This increased government spending has had a positive effect on the US economy and often leads to faster technological innovation.
If the war is happening at your doorstep, there is the cost of rebuilding your infrastructure and agriculture. This can lead to very high government debt, hyperinflation, or other bad economic consequences.
I am no foreign policy expert, but it’s doubtful that we will be involved in/create a total war that is on the doorstep of US politicians and citizens. Therefore, we will continue to be in our state of not-so-total war in a foreign region.
The good news (irony as I write) is that the US has been at war in the Middle East and Asia since the 1960’s. So, business as usual. If the stock market likes anything, it’s business as usual.
A very short-term example
News broke of the US killing Iran’s General Soleimani on January 3rd. The S&P 500 that day lost .28 points. Ho hum, another day on the brink of war.
My point, and I do eventually get to it, is that stock market performance is not dependent on wars or impeachments or Golden Globe awards or Superbowl wins. In theory, it depends on companies being profitable, but that is also subject to the whims of investor psychology znajdź więcej informacji.
Just hold steady to your long-term investment plan and go see Little Women at the movies. If I dare make a prediction, it’s that Saorise Ronan wins an Oscar. Well, she should.
