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Perspectives

Market Ramifications from the Middle East War

by Fortem Financial October 18, 2023

This brief note is not meant to cover all the events of recent days or exhaust the potential economic and market implications of the war in the Middle East. Our goal is to provide you insight into our view of the potential impacts of these events on the global markets.

Factors impacting economic and market conditions:

 

Short Term

  1. This war could be lengthy, as Israel has stated its determination to destroy Hamas. Any escalation to include Iran is speculation at this point.
  2. The U.S. and West will likely provide abundant supplies to Israel, perhaps at the eventual expense of aid to Ukraine (although U.S. munitions are running short due to the Ukraine war).
  3. Regardless of the eventual outcome, there will undoubtedly be many more casualties.
  4. Defense spending will rise, period.
  5. Foreign policy will likely play a bigger part in the 2024 election debate.

Longer-term

  1. The U.S. and Israeli intelligence failure will likely be the subject of investigations in the future.
  2. The decline of U.S. hegemony will continue to have far-reaching implications on world stability. Deglobalization (which is inflationary) is expected to continue.
  3. Potential diplomatic mutual recognition between Israel and Saudi Arabia is shelved for now.
  4. Recent attempts at rapprochement with Iran by the Obama and Biden administrations will likely be criticized.

The effects of these factors on the economy and markets

  1. War is generally an inflationary, risk-off period and, at a minimum, creates capital markets volatility (both stocks and bonds).
  2. Oil prices are likely to be higher than what would otherwise be the case. (Investors should not be complacent about the risk of a major oil shock.)
  3. Stocks are finding a reprieve from the pullback in bond yields after Fed policymakers said that tighter financial conditions strengthen the case for proceeding cautiously on rates (independent of anything to do with the Middle East).
  4. The direction of bond yields will likely continue to have the biggest influence on stock prices.
  5. This war likely increases the appeal of bonds over stocks, large cap over small caps, U.S. relative to the rest of the world, and energy and defense stocks over other cyclicals.

Our prayers go out to all the victims of the atrocities associated with this war.

Source: Bob Doll Crossmark Investments

 

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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