Geopolitical Tensions and Negative Momentum

geopolitical tensions

Market momentum is negative again. That was fast. I recall yesterday my excitement that we could pull capital off the sideline. Nope. Not now. Here we go again, everyone. Following today’s terrorist attacks in Kabul, Afghanistan are another reminder of geopolitical tensions and their impact on the market. It’s been 18 months since COVID-19 struck the global economy. 

Before that – we had a wealth of geopolitical tensions. These tensions could trigger a 2% to 3% slump in the S&P 500 in a day. Remember when Iran shot down an airliner? It feels like this happened 10 years ago. But it was January 2020. Remember when Kim Jung Un was shooting rockets into the water? That was just a few years ago.

Even in the face of economic recovery, we are witnessing a profound return of geopolitical premium in the markets – especially in the oil and gas markets. We have to remain diligent. And we have to be prepared for faster breakdowns in market momentum. 

Geopolitical Tensions and Investors

The current geopolitical paradigm is greater than just Afghanistan. The Cold War between the United States and China over technology will only accelerate. The squabble over the South China Sea is still in the early innings. The instability of regions like Ukraine, Kashmir, and Western Africa were on full display before COVID-19. It moved from the front page to page seven in most financial publications. The stories are slowly moving back above the fold each morning.

I worry – as always – that we can be complacent as investors. And I’m always watching the CBOE Volatility Index because it is a great tool to profit from as we look for people to get lulled back into a trance. If the VIX gets back under 16, that will be a great opportunity for speculation . 

I remind everyone of my view on the world. Human beings create all the problems, and technology solves them. But there is no solution right now for radicalism, terrorism, and political upheaval… Unless you’re willing to start talking about bombs. Defense stocks are the best sector to be trading right now. And I’ll dive deeper into why this sector is on the verge of creating strong price-trend opportunities today and in the future.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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