Hello everyone
This week has been interesting to say the least, largely due to some market nervousness and response to the tensions in North Korea. Some negative economic data has come forward, such as a disappointing jobs report and a guy named David Stockman who popped out of nowhere with a new book to sell. He claims that the world as we know it is crashing. Maybe, maybe not- but there are two sides to every story, most of my audience knows that.
This prompts me to ask, “Is war good for the markets?”
War is never a good thing. But if we look at the past two conflicts in which USA targeted a sitting dictator/regime, both the 1991 Gulf War, and the 2003 Gulf War-2, the markets rallied strong after we invaded. See charts below.
The invasion of Afghanistan occurred in October 2001. 2001 was a time of market problems and scandals, as some may remember the Enron, WorldComm, Tyco, etc financial scandals. The previously-run-up NASDAQ was crashing, having started its decline in 2000. That was a falling knife nobody should have tried to catch. The markets were flat during 2001 for the most part and the Afghan invasion did not affect the markets much.
So what happens if we target Kim Jong-un, a sitting dictator in North Korea, next door to South Korea, our allies and location of Samsung, Kia/Hyundai, etc ? Are there any similarities we can associate to Saddam and Kuwait ? Will the markets respond the same ?
Moving back to market and TSP matters, the markets this week had two days of “distribution” (a term pioneered by William O’Neil of Investors Business Daily), which indicates selling by large institutions.
Since I am a believer of “react to the market, don’t try to out guess it” and “the market is always right”, my opinion is that 100% G-Fund is prudent right now. No, I do not believe the world is crashing nor that the markets are headed straight down. However in light of the North Korea tensions (not a big deal just a potential nuclear missile launch…), and the fact that we have had some nice gains since January, my opinion is lets lock those in and make a precautionary move to G-Fund.
As always, if you find this site informative and/or entertaining, please share it with others. If, at the very least, I have triggered a new interest in how the markets work or a desire to be more hands-on with your TSP, then I think that is very cool. Thanks everyone…have a good weekend.
– Bill Pritchard
