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BofA Says Buy Geopolitical Dips As Russia Talks Nuclear Armageddon
For a supposedly "efficient" discounting mechanism, stocks often appear oddly oblivious, particularly to geopolitics.
If "Mr. Market" could talk, he'd surely disagree with that characterization. It's not that stocks are unaware that the world's a dangerous place, he'd say. Rather, it's that unless and until there's a clear transmission channel from a given conflict to corporate bottom lines and/or monetary policy, there's nothing to price.
As for existential geopolitical risks -- like, say, nu
BOA fails to mention the most important transmission channel = will a crisis push vol levels higher and for how long?
It feels like the “algos” are trying to shake me down.
Three geopolitical flashpoints: Russia/Ukraine, Israel/Iran, China/Taiwan.
How likely is it that Russia/Ukraine will have new geopolitical consequences greater than or different from those its already had? Putin/Lavrov were issuing nuclear warnings weekly in 2022, investors got used to it.
Israel/Iran has already had a significant impact on energy markets, the protagonists seem to be backing away from war, and the obvious hedges (again, energy) are already being used.
Investors are – my guess only – not going to really hedge China/Taiwan until they see the invasion fleet forming up. The potential consequences are so dire, it is hard to imagine effective protection that doesn’t remove you from the playing field.
It is so easily solved: US significantly increases oil drilling in the US -dropping the global price and reducing the money flows to evil empires. The US should also significantly increase funding for nuclear power.
Obviously, certain parties do not want this to happen (or it would have already happened), therefore, my conclusion is that the US will continue to send money to the US defense contractors (based on my reading that is where the bulk of this $95B aid goes) so that they can continue to manufacture and send weapons/military equipment to Ukraine/Israel and Taiwan.
Is anyone aware of a publicly traded fund of the top 25, or so, US military contractors?
There are aerospace and defense ETFs and at least one pure defense ETF, not sure if limited to US names. Easy to find them. Note European defense stocks are doing particularly well, for obvious reasons.