The Week Ahead: How will Syria Impact Stocks?

September 8th, 2013
in contributors

by Jeff Miller, A Dash of Insight

Last week I predicted that we would see volatility without clarity. The market concerns include Syria, changes in Fed policy, the nomination for Fed Chair, and the debt ceiling, roughly in that order. We got the employment report, the last big piece of economic data before the FOMC meeting, and plenty of speeches and pundit pontification. What do we know? Nothing more than we did a week ago! This looks like a victory on the cloudy crystal ball front.


Follow up:

My volatility prediction was also accurate. While the stock market week was positive, the ride was pretty wild, as you can see from the weekly chart.

Yahoo finance weekly chart

The early Tuesday gains had a short life, with reports of missile tests in the Mediterranean. Wednesday clawed back gradually, and Thursday was one of the quietest days of the year. Friday deserves special attention, so let us turn to Doug Short's great chart and explanation:

Dshort snapshot

There was an initial positive reaction to the employment number, a comment by Putin, and then more commentary from Obama and others at the G20 meetings. This is the essence of volatility driven by headlines.

The Week Ahead

The story line for the coming week will be all about Syria. There is little new economic data, The FOMC meeting is more than a week away and FedSpeak is in a quiet period. The market will gyrate with each piece of news about Syria, so what should we be watching?

As always, I am not writing about what the policy should be. As citizens, we all can and should have an opinion. As investors, we need to understand the risks. Here are the key questions.

Will there be military action?

What are the possible consequences?

Is there possible mitigation?

  • If oil prices move too high, the US might respond with a release from the Strategic Petroleum Reserve (via the FT).

When will there be an answer?

  • A failure in the Senate could forestall US action as soon as next week.
  • House action could be delayed for a week or more. Republican leaders are calling for a "robust debate."
  • Whether or not there is immediate action, the issue could well last continue for months.

What are the likely market effects?

Fedor Sannikov takes an exhaustive look at the market effects after the outbreak of wars, suggesting that adverse economic and stock market effects are usually overstated. He shows statistics for a long list of wars, concluding as follows:

"I don't mean to sound callous about any of this but my job is to look at it from an economic perspective. The historical performance of the market following the outbreak of both major and minor wars seems to indicate that, regardless of the actions taken by the U.S. or UN forces, there will likely not be a lasting effect on global equity markets.

For the moment, assume these recent developments drag the U.S. into the middle of another civil war in the region and ground forces are brought in to stop the killing of Syrian civilians. History teaches us that wars are not harbingers of bear markets. Certainly in the short run conflicts can cause the market to drop as people fear the worst and investors' risk aversion tends to increase.

However, when you look at historical equity returns following the outbreak of a war, you'll find the wars seem to have a slightly positive impact on the equity markets."

I have some thoughts on what to expect about Syria which I'll report in the conclusion. First, let us do our regular update of last week's news and data.

Background on "Weighing the Week Ahead"

There are many good lists of upcoming events. One source I regularly follow is the weekly calendar from For best results you need to select the date range from the calendar displayed on the site. You will be rewarded with a comprehensive list of data and events from all over the world. It takes a little practice, but it is worth it.

In contrast, I highlight a smaller group of events. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios. Each week I consider the upcoming calendar and the current market, predicting the main theme we should expect. This step is an important part of my trading preparation and planning. It takes more hours than you can imagine.

My record is pretty good. If you review the list of titles it looks like a history of market concerns. Wrong! The thing to note is that I highlighted each topicthe week before it grabbed the attention. I find it useful to reflect on the key theme for the week ahead, and I hope you will as well.

This is unlike my other articles at "A Dash" where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.

Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!

Click below to read more .

Pages: 1 · 2 · 3 · 4

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved