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Over the weekend, Palestinian militant group launched a large-scale attack on Israel. The attack was a surprise for two reasons. First, though the two sides have gone back and forth with small attacks for years and volatility in the Middle East is nothing new, the scale, coordination, and number of attackers are unprecedented in modern times. Second, Israel, which is known for having one of the best defense systems in the world, was unable to detect or deter the surprise attack.
Investing Profitability & Emotion Mix Like Oil and Water
It suffices to say that the majority of the world hopes for peace and a resolution, with thousands of causalities it is tough for anyone not to feel emotional and sad. However, from a strictly investing perspective, investors must find a way to separate emotions from themselves because emotions like fear and greed can cloud judgment and lead to impulsive and irrational decisions. Below are 3 things investors should know about markets and war:
Markets Tend to Shrug Off Geopolitical Events
Investors must defer to historical data to avoid making decisions based on emotions. While history doesn’t always repeat itself, it does tend to rhyme. Each geopolitical event is new and unique; however, history tells us that US equities usually encounter short-term weakness, but tend to absorb and shake off these events in the long-term.
Image Source: LPL Research
Observe the Price Action vs. the News
If equity markets were easy, more investors would be profitable. Instead, Wall Street marches to the beat of its own drum and is forward-looking. For example, in late 2022, when inflation numbers hit their highest level in more than 40 years, markets reversed and finished higher on volume – marking the bear market low. Rather than taking news at face value, observe how equities react in the face of bad news.
Image Source: TradingView
Panic Rarely Pays Off
Investors should always be vigilant and manage risk. That said, panic rarely pays off. Rather than blowing out positions in fear, more times than not, investors are best served to see how their positions absorb lousy news in the coming days. Remain vigilant, but never panic.
3 Industries to Watch
Energy
Obviously, energy is the biggest beneficiary of war in the Middle East. Even before war broke out, both the United Sates Oil Fund ETF ((USO - Free Report) ) and United States Natural Gas Fund ETF ((UNG - Free Report) ) were enjoying multi-week rallies.To “add fuel to the fire,” the US Strategic Petroleum is at 40-year lows, and supply is waning for both commodities. Investors should also watch individual names such as Exxon Mobil ((XOM - Free Report) ), Vital Energy ((VTLE - Free Report) ), and Occidental Petroleum ((OXY - Free Report) ).
Counter-terrorism
Palantir ((PLTR - Free Report) ) is another beneficiary of unrest in the Middle East. The unique company specializes in software, security, and artificial intelligence solutions. Governments worldwide, including defense and intelligence agencies, use Palantir’s software platforms to enhance their security and defense capabilities in several ways.
Image Source: TradingView
Traditional Defense Contractors
Despite the ongoing conflict in Ukraine, defense contractors such as General Dynamics ((GD - Free Report) ),Boeing ((BA - Free Report) ), and Lockheed Martin ((LMT - Free Report) ) have been falling. However, now the defense juggernauts are enjoying a new catalyst and more reasonable valuations – a bullish combination.
Image Source: Zacks Investment Research
Conclusion
The recent large-scale attack by a Palestinian militant group on Israel is causing market volatility. Amidst the emotional impact of such events, investors are reminded to separate their emotions from investment decisions. Historical data suggests that while markets may experience short-term weakness during geopolitical events, they often recover in the long-term.
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War & Wall St.: 3 Things you Need to Know
War in the Middle East
Over the weekend, Palestinian militant group launched a large-scale attack on Israel. The attack was a surprise for two reasons. First, though the two sides have gone back and forth with small attacks for years and volatility in the Middle East is nothing new, the scale, coordination, and number of attackers are unprecedented in modern times. Second, Israel, which is known for having one of the best defense systems in the world, was unable to detect or deter the surprise attack.
Investing Profitability & Emotion Mix Like Oil and Water
It suffices to say that the majority of the world hopes for peace and a resolution, with thousands of causalities it is tough for anyone not to feel emotional and sad. However, from a strictly investing perspective, investors must find a way to separate emotions from themselves because emotions like fear and greed can cloud judgment and lead to impulsive and irrational decisions. Below are 3 things investors should know about markets and war:
Markets Tend to Shrug Off Geopolitical Events
Investors must defer to historical data to avoid making decisions based on emotions. While history doesn’t always repeat itself, it does tend to rhyme. Each geopolitical event is new and unique; however, history tells us that US equities usually encounter short-term weakness, but tend to absorb and shake off these events in the long-term.
Image Source: LPL Research
Observe the Price Action vs. the News
If equity markets were easy, more investors would be profitable. Instead, Wall Street marches to the beat of its own drum and is forward-looking. For example, in late 2022, when inflation numbers hit their highest level in more than 40 years, markets reversed and finished higher on volume – marking the bear market low. Rather than taking news at face value, observe how equities react in the face of bad news.
Image Source: TradingView
Panic Rarely Pays Off
Investors should always be vigilant and manage risk. That said, panic rarely pays off. Rather than blowing out positions in fear, more times than not, investors are best served to see how their positions absorb lousy news in the coming days. Remain vigilant, but never panic.
3 Industries to Watch
Energy
Obviously, energy is the biggest beneficiary of war in the Middle East. Even before war broke out, both the United Sates Oil Fund ETF ((USO - Free Report) ) and United States Natural Gas Fund ETF ((UNG - Free Report) ) were enjoying multi-week rallies.To “add fuel to the fire,” the US Strategic Petroleum is at 40-year lows, and supply is waning for both commodities. Investors should also watch individual names such as Exxon Mobil ((XOM - Free Report) ), Vital Energy ((VTLE - Free Report) ), and Occidental Petroleum ((OXY - Free Report) ).
Counter-terrorism
Palantir ((PLTR - Free Report) ) is another beneficiary of unrest in the Middle East. The unique company specializes in software, security, and artificial intelligence solutions. Governments worldwide, including defense and intelligence agencies, use Palantir’s software platforms to enhance their security and defense capabilities in several ways.
Image Source: TradingView
Traditional Defense Contractors
Despite the ongoing conflict in Ukraine, defense contractors such as General Dynamics ((GD - Free Report) ), Boeing ((BA - Free Report) ), and Lockheed Martin ((LMT - Free Report) ) have been falling. However, now the defense juggernauts are enjoying a new catalyst and more reasonable valuations – a bullish combination.
Image Source: Zacks Investment Research
Conclusion
The recent large-scale attack by a Palestinian militant group on Israel is causing market volatility. Amidst the emotional impact of such events, investors are reminded to separate their emotions from investment decisions. Historical data suggests that while markets may experience short-term weakness during geopolitical events, they often recover in the long-term.