Stock markets are less afraid of war than we imagine – The Business Times

WHILE Hizbollah struck a tenuous truce with Israel, fighting continued in Gaza and Yemen, prolonging fears of Iranian intervention. Russia and Ukraine carry on hammering one another, now with long-range ballistic missiles.

Some pundits still fret that conflict will spread to North Atlantic Treaty Organization nations, citing the cutting of the data and power lines connecting Baltic allies. Many think that this threatens stocks, seeing sporadic Straits Times Index (STI) volatility on war news as evidence.

No. Markets have already proved that these regional conflicts are not threats – a lesson worth heeding. Let me explain.

Bear markets form in two ways: atop the “wall of worry” amid euphoria – when lofty expectations make markets susceptible to any material new negative. Or, when a new huge, multitrillion-dollar negative surprise wallops us.

Today’s wars? They are horrendous, but not bear-market catalysts. They drag sentiment down, keeping euphoria at bay. And they aren’t a wallop.