If we go to war with Syria, how will that impact your financial life? While I haven’t heard anyone specifically ask this question yet, I know it’s on many people’s minds. Of course I can’t ever predict the future. Nobody can. And in war, it’s even more difficult to foresee what is yet to come. There is just no telling what the Law Of Unintended Consequences will dish up once that war machine starts rolling.
Others can debate the advisability of going or not going to war. And we can all agree that no matter how this turns out, the cost of war and the human tragedy that accompanies it is always too damn high.
But for a moment, let’s think about this from a personal finance angle. Will your financial future explode like a cruise missile if President Obama sends out the attack code? Is it better to play it safe now in anticipation of this fight?
I could be wrong of course, but I don’t think so. There are a couple reasons why I am of this mind.
1. Got Oil And Strategic Support? Yes.
Among the countries that issued a joint statement condemning the chemical weapons attack in Damascus were Saudi Arabia and Turkey. Of course this doesn’t mean they will necessarily support military action if it gets to that point. But it lays a solid foundation for the United States regardless of how things unfold.
Saudi Arabia is the key player in OPEC of course and a critical energy supplier to the world. Turkey isn’t part of OPEC but it is one of the most important Muslim counties in the Middle East. These two countries act according to their own national interests with respect to Syria. For now, their interests and those of the United States are in line. That is a positive for world stability and by proxy, for the economy and stock market.
2. Got Precedence? Yes.
Let’s look at what happened to the S&P 500 during periods of war and conflict as a way to measure the impact that military action has historically had on the economy and financial world.
First consider that awful day 9/11. The market immediately closed and remained shut for over a week. When the stock market reopened, it did fall. But as you can see from the chart below, the market regained most of the losses within 30 days. 9/11 changed the world – but it wasn’t the end of the world.
Now consider the Gulf War. It ran between August 2, 1990 and February 28, 1991. You can see from the chart below that in this case, the market actually did quite well. It wasn’t without dips and drops. But over the course of that war, the market climbed a bit over 8%. Nobody expected the market to climb during this bloody conflict with this heavily armed OPEC producer member but it did. That is precisely the point.
3. Got A Crystal Ball? No.
Two out of three ain’t bad…right? I can’t prove that war is benign for investors. And there is no way to know how current events in Syria will play out and how that may impact the financial world.
But when we think back to past conflicts it’s easy to understand that many forces impact the market. It’s complicated and not linear. While war is a nasty and terrible blight on humanity, possible conflict does not in and of itself justify cashing in your investment chips.
Are you doing anything different with your investments in light of a potential attack on Syria? Why or why not?