When geopolitical\ntensions rise, it can be easy to let your emotions take control of your\ninvestments. But, as history shows us below, global conflict or even war does\nnot necessarily mean weak markets. In times like this, I believe the best thing to do is stay steady\nand focus on the hard data and key economic indicators. To help you do this, I\nam offering all readers a look into our just-released January 2020 Stock Market\nOutlook report.
\n
\nThis report will provide you with our forecasts\nalong with additional factors to consider:<\/p>\n\n\n\n
- Why you should stay bullish?<\/em><\/li>
- What sectors show the best opportunity?<\/em><\/li>
- What industries within those sectors most merit your\n attention?<\/em><\/li>
- Our outlook for global markets.<\/em><\/li>
- Why are U.S. large cap stocks rising to new records? <\/em><\/li>
- And much more. <\/em><\/li><\/ul>\n\n\n\n
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!
IT’S FREE. Download the Just-Released January 2020 Stock Market Outlook<\/a>1\u00a0<\/a><\/sup><\/strong><\/p>\n\n\n\n_____________________________________________________________________________<\/p>\n\n\n\n
Let\u2019s start with stocks. In the table below, I\u2019ve laid out some provocations (and worse) throughout history that I think bear some resemblance to the current situation. I\u2019ve also included stock returns in the year that the event occurred. \u00a0<\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-01-11-MOTM-image-1-of-3-1.png\")
Source: Annual Returns on Stock, T.Bonds and T.Bills 1928-Current2<\/sup> <\/em> <\/figcaption><\/figure>\n\n\n\nAs you can see, there are some very significant,\nconsequential events listed here. Market returns are mixed. In some cases, the\ndeclines were relatively modest, and in other cases, the upside was big. I\nbelieve the takeaway here is that geopolitical pressures and even war do not\nautomatically imply weak markets. If the geopolitical situation gets bad, the\nFederal Reserve is tightening monetary policy (raising interest rates) to fight\nrising inflation, and oil prices are shooting higher, then maybe you get an\noutcome like 1990. Today, inflation is low, interest rates are low, the Fed is\ntaking a neutral-to-dovish stance while expanding their balance sheet, and GDP\ngrowth is expected to notch 2%. <\/p>\n\n\n\n
Geopolitics matter, but economic fundamentals matter more,\nin my view. <\/p>\n\n\n\n
What about oil markets? When Iraq invaded Kuwait in 1990, oil was a key factor and rising crude prices put pressure on an already weak U.S. economy. But it is important to remember that in 1990, the U.S. was a major oil importer, and we were not a dominant energy producer on the global stage. Today, we are the world\u2019s largest oil producer and our reliance on imports has been in decline for years:<\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-01-11-MOTM-image-2-of-3.png\")
\ufeffSource: Energy Information Administration3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\nAnother key feature of the current energy market in the U.S.\nis that technological advancement and new efficiencies have allowed our energy\nconsumption to remain relatively flat over the past decade. Fewer imports, more\nproduction, and level consumption mean less reliance on foreign oil. <\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-01-11-MOTM-image-3-of-3.png\")
Source: Energy Information Administration4<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\nIf Iran decides to disrupt oil markets perhaps by blocking\nshipping lanes in the Strait of Hormuz, for instance, I would argue the effects\non the U.S. economy would be negligible. During the period of \u2018sustained high\noil prices\u2019 in the chart below, the equity market did just fine and the economy\ncontinued to expand. Should oil prices go higher from here as tensions with\nIran continue, I do not think we will see a material impact on growth\nfundamentals.<\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-01-11-MOTM-image-4-1024x395.png\")
Source: Federal Reserve Bank of St. Louis5<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\nBottom Line for\nInvestors<\/strong><\/p>\n\n\n\n
Other potential scenarios to consider are that further\nescalation \u2013 or war \u2013 could lead to more government spending, which may\nactually boost overall growth, in my view. Or perhaps increased risk aversion\nleads to more bond buying, putting downward pressure on yields. Again, outcomes\nare highly unpredictable. <\/p>\n\n\n\n
In my opinion, the overarching point here is that while\nthere are myriad potential outcomes, investors should consider the possibility\n\u2013 or even the probability \u2013 that geopolitics, economics, and markets often move\nin different lanes. While the geopolitical situation worsens, the economy can\nstill grow and markets can still thrive. It\u2019s an investor\u2019s job to continually\ntake the good with the bad, and to weigh the impact of a geopolitical dust-up\nversus the impact of macroeconomic forces. The latter, in my view, is almost\nalways more important. <\/p>\n\n\n\n
To help you get a deeper look into some of these macroeconomic forces at play, I am offering all readers our\u00a0<\/a>Just-Released January 2020 Stock Market Outlook Report.<\/a><\/strong>
\u00a0
This Special Report is packed with newly revised predictions to consider for 2020 that can help you base your next investment move on hard data. For example, you’ll discover Zacks\u2019 view on:<\/p>\n\n\n\n- Why you should stay bullish?<\/em><\/li>
- What sectors show the best opportunity?<\/em><\/li>
- What industries within those sectors most merit your\n attention?<\/em><\/li>
- Our outlook for global markets.<\/em><\/li>
- Why are U.S. large cap stocks rising to new records? <\/em><\/li>
- And much more. <\/em><\/li><\/ul>\n\n\n\n
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!6<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"
A historical review of how worsening geopolitical conditions can impact the market <\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8431","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8431","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8431"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8431\/revisions"}],"predecessor-version":[{"id":10657,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8431\/revisions\/10657"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8431"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8431"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8431"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- What sectors show the best opportunity?<\/em><\/li>
- What sectors show the best opportunity?<\/em><\/li>