Investors and businesses across the world breathed a collective sigh of relief on Monday, April 16, as military airstrikes on Syria conducted by the US, France, and the UK were revealed to have a relatively limited effect on stock markets – at least for now. The Financial Times reports that US stocks opened the week on a decidedly firm note, while oil prices fell after recently reaching four-year highs. To see that global stocks have not taken a dive is a welcome surprise for the world’s markets, and can be taken as a sign of short-term bullish growth that can ease Syria uncertainties for many.
Although the geopolitical risk has yet to completely evaporate, it is encouraging to note that all sectors of the S&P 500 rose this week by 0.8% to 2,677.84 points, moving back into positive territory. In addition, CNBC reveals that the Dow Jones Industrial Average closed at 24,573.04, surging on by 212.90 points, while the Nasdaq composite advanced 0.7% to close at 7,156.28. All this has led to promising gains in the UK and EU stock markets, which had come off their third straight week of improvements after edging higher on Friday, April 13.
Economic data and earnings proved to be a positive force for global stock markets, something that Nadex attributes to the timing of the airstrikes themselves which are believed to be the biggest intervention by Western countries against current Syrian President Bashar al-Assad. Military strategists had launched their strikes after markets closed on Friday, which may be the reason behind the calm market reactions come Monday morning.
Moreover, markets are gaining confidence as the missile strikes are unlikely to trigger a broader and more prolonged conflict. The sentiment comes after US Secretary of Defense James Mattis described the strikes as a “one-time shot,” aimed at the Syrian government’s chemical weapons infrastructure. As a result, Wall Street has some high expectations for this earnings season, which has taken the global focus off of conflict. Analytics expect a 17.3% increase in first-quarter earnings.
In reaction to this news, UK stocks and the Pound Sterling enjoyed a welcome lift to start the week as well. The Guardian suggests that the currency, which has since risen above $1.43, is on its second highest level since the Brexit vote and is the highest since January 2018. UK markets took a quick dip at the end of Monday but quickly recovered to close April 17 on a high note, bolstered by wage growth. Labor market data revealed that this is the first time wages grew more than inflation in almost a year, which bodes well for UK markets and can help cement expectations for higher rate rises from the Bank of England by May this year.
Stocks in focus
Local stocks finished impressively higher on Tuesday, with the FTSE 100 index posting a 0.39% increase to 7,226.05 points to recover from its recent 0.1% loss. Shares of Associated British Foods PLC closed up with a 4.1% increase, following a rise in first-half revenues in UK Primark stores. Meanwhile, high street retailer JD Sports Fashion PLC rose by 5.4% from a full-year pretax profit of 24% for the 2018 fiscal year.
Outside Britain, Germany’s DAX 30 index surged by 1.6% to end at 12,585.57 points on Tuesday, the highest posting since February 7. France CAC 40, meanwhile, rose by 0.8% to 5,353.54 to represent its highest since February 2. Overall, The Stoxx Europe 600 index rose 0.8% to 380.77, the highest level since February 27.
The road ahead for investors
In light of all this – the US/UK/France air strikes, and its implications on the global stock market – what is the best course of action for those with stock market investments? Market Watch’s Mark Hulbert suggests everyone should sit tight and “do nothing.”
The investment and trade expert shares that those planning to sell after seeing airstrike headlines or – on the off chance of a retaliation, that Russia has fired back – will already be too late. Investment firms will have quickly sold stocks that are in danger of falling in light of any conflict escalation before you would have heard of news about it. Moreover, the stock market’s post-crisis low is actually a good buying opportunity as nervous investors sell off stock. Market history has shown that stock markets have a knack for rebounding powerfully within six months of geopolitical crises. For instance, the Dow Jones Industrial Average posted positive numbers less than two months after the 9/11 terrorist attacks, higher than they had been on September 10, a day before the crisis. By carefully studying stock market movements in crisis, it can be inferred that the markets eventually makes it back to where they would have been anyway.
Of course, the moral arguments for and against the airstrikes leave much to be discussed. But from an investment standpoint, the lesson is that worrying about your investments in a time of geopolitical crisis actually has no purpose, as the market is bound to bounce back.
As for the UK stock market in general, much and more can be expected from its performance in the coming months. Investors cautiously but optimistically hope to reap the benefits of dropping unemployment rates and a stronger Pound Sterling.