While Edwin Starr’s famous lyric from his 1969 hit holds much truth, the reality is that geopolitical turmoil often catches the eye of speculators looking to profit from potential disasters.
It’s important, however, to approach such situations with caution. Attempting to capitalize on crisis-driven market movements doesn’t always pay off, and the risks can be significant.
We cannot ignore the effects of geopolitical events on financial markets. Such events—whether they involve war, political instability, or trade disruptions—can have far-reaching impacts on commodities, currencies, and equities. Historically, markets have shown both volatility and resilience in response to global crises. However, speculating on short-term price movements driven by fear or panic is a risky strategy.
We cannot ignore the effects of geopolitical events on financial markets. Such events—whether they involve war, political instability, or trade disruptions—can have far-reaching impacts on commodities, currencies, and equities. Historically, markets have shown both volatility and resilience in response to global crises. However, speculating on short-term price movements driven by fear or panic is a risky strategy.
As financial professionals, it’s important to remember that while crises present opportunities, they also come with heightened risks. For example, during the early days of the COVID-19 pandemic, certain sectors like healthcare and technology saw strong gains, but others, like travel and hospitality, suffered dramatic losses. Similarly, betting on rising oil prices during political unrest may seem like a no-brainer, but it can quickly turn against you if conditions stabilize unexpectedly.
Since early September, we’ve been discussing the opportunity to buy oil on dips, and those who followed this strategy would have seen strong returns in the recent rally. This highlights the importance of identifying opportunities in the commodities market early.
For instance, the rally in oil prices due to supply concerns following geopolitical tensions in the Middle East has allowed investors to either lock in profits or raise their stop losses. These strategic moves ensure that we capitalize on gains while protecting against sudden market reversals.
Last week, I also recommended raising stop levels on positions in copper, aluminium, corn, and wheat. While it might be a bit premature to use sliding stops (trailing stop orders that adjust upward as the price rises), we have already secured solid returns from these well-timed positions, and we should not lose on the gains we’ve accumulated.
Turning to gold, a long-time safe haven for investors, it continues to serve as an excellent hedge against currency depreciation. Over the years, we’ve accumulated gold, and its performance speaks for itself.
Since the euro’s inception in 1999, the currency has lost considerable value against gold. Back then, gold was priced at under €300 per ounce; today, it’s hovering around €2,400 per ounce. This remarkable appreciation underscores gold’s enduring appeal as a store of value, particularly in times of economic uncertainty and failing government policy.
This dramatic rise also reflects poorly on the euro’s purchasing power over the long term. Such examples reinforce gold’s utility not just as a hedge, but as an asset that outperforms during periods of currency devaluation and inflation.
Now, I know many tech enthusiasts will argue that Bitcoin (BTC) has outperformed even gold in recent years. And while there is some truth to that, I approach this claim with caution. Yes, Bitcoin has seen exponential growth since its inception, but it’s important to remember that Bitcoin, and cryptocurrencies in general, remain highly speculative and volatile.
For example, in 2023, the crypto industry faced numerous challenges, including regulatory scrutiny, market crashes, and liquidity issues. This level of volatility makes it difficult to declare Bitcoin a reliable hedge against inflation, especially compared to gold, which has a track record spanning centuries. Additionally, the future of cryptocurrencies is highly uncertain as government policies and regulations evolve. As such, while I remain cautiously optimistic about crypto, we need more years of data before we can confidently classify it as a safe haven.
Looking ahead, the U.S. Presidential election is casting a significant shadow over the markets. Many investors are sitting on the sidelines, waiting for the outcome before making big moves. This uncertainty is understandable; election results can have major implications for policies affecting trade, taxes, and regulation—all of which influence the financial markets.
Personally, I have strong opinions about which candidate would be better for global stability and economic growth. However, at this point, I think most of us just want the election to be over so we can move forward. Regardless of the outcome, I expect significant market movements—both bullish and bearish—once the results are in. This should create opportunities for active traders, but it’s important to have a clear direction before making long-term bets, especially in financial instruments.
As we enter October, it’s worth noting that this month has historically been marked by major market events. We’ve witnessed notable market collapses in past Octobers, such as the infamous Wall st. Crash and the Black Monday crash of 1987. However, it’s also true that October has marked the end of several bear markets, providing a turning point for stocks.
At present, we are not in a clear bear market, but the heightened volatility typical of October means traders should stay vigilant. Whether we continue the bull run or face a sharp correction, it’s important to remain flexible and ready to adapt to new market conditions.
While there are opportunities to profit during times of crisis and uncertainty, investors should proceed with caution and have a long-term strategy in place. Oil, gold, and commodities have proven to be reliable bets during the recent period of geopolitical tensions, but short-term speculation, especially in volatile sectors like cryptocurrencies, requires a careful approach. As we navigate through the uncertainties of the U.S. election and potential market swings, maintaining a balanced, diversified portfolio remains the key to weathering whatever storms lie ahead.
The post WAR! What is it good for? Absolutely nothing! first appeared on JP Fund Services.
The post WAR! What is it good for? Absolutely nothing! appeared first on JP Fund Services.
The post WAR! What is it good for? Absolutely nothing! first appeared on trademakers.