Just when almost everything is starting to get better with a (supposedly) done trade deal between the two largest economies in the world, an event of military nature is brewing, where two non-bordering Middle Eastern countries began to trade projectiles at each other, threatening to widen an already existing conflict in the region.
Being a sensitive entity, Mr. Market had reacted, but not as bad it seems, for now; the S&P 500 index had gone down by around 1.1% since Thursday1, and with gold (the safe haven asset) and crude oil (very positively correlated to the area concerned) prices up by about 1.8%2 and 7.0% (Brent)3 respectively. However, with both sides warning of escalation, this may just be the beginning of another downturn.
While in terms of global affairs, each geopolitical and socioeconomical occurrence had a different context, for the market, the narrative remained the same; it goes up when there is good news and goes down when there is bad news. If one had invested at least for the past couple of years, he/she may have noticed that the market usually goes through a series of rise-and-fall patterns.
Thus begs the question of why a substantial number of people react wildly to boom and bust news, to which the answer is simple: emotions. Adding the effect of media (mainstream and social) making remarks about how things are going to get better or worse (or both) amplifies the feelings inside one’s minds.
As I had always commented, short of a nuclear apocalypse or an alien invasion, the investing world would continue to chug along, and all things, good and bad, shall pass. While one is at it, do make sure to take advantage of the situation, like buying in when others are selling out, which works for our style of investing.
Keep calm and carry on investing.
1 – Yahoo Finance
2 – Goldprice.org
3 – Oilprice.com
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