Invest in Caution: The Impacts of Trump's Actions on Wall Street
Implications of Potential US Military Engagement for Financial Investors
By Christina Lohner
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Forget the looming Middle East crisis—it's not the major concern investors should have when it comes to their stocks. Instead, it's Trump's actions that have investors treading carefully.
War Warnings and Market Fears
As tensions rise between Israel and Iran, many investors are worried about a possible US intervention turning into an all-out war. The media is stirring up the fear of an escalation, but capital market expert Stefan Riße argues that investors shouldn't panic—at least not for the reasons you might think.
In a conversation with ntv.de, Riße explains that the US, with its military superiority, would dominate any interaction with Iran. Thus, he doubts that the war would create a regional wildfire or lead to a significant oil price explosion.
Oil Delays and Potential Global Effects
Still, there's a potential risk to oil supply and prices. In the event that tankers can't pass through the Strait of Hormuz, a vital shipping route, a bottleneck of up to four weeks could occur, with China feeling the brunt of the impact due to its strong ties with Iran. However, the capital market strategist assures that economically, the situation wouldn't be catastrophic.
The Real Risk: Tariffs and Inflation
But don't let your guard down just yet. According to Riße, the real risk lies not in potential Middle East conflicts but in the ongoing US trade war. The unresolved issues with tariffs could lead to a recession or even stagflation and may escalate inflation rates alongside rising oil prices.
With decreased farming efficiency due to labor scarcity resulting from trade disputes, uncertainty in the market, and decreased investment, inflation may soar, causing turbulence in equity, bond, and commodity markets as monetary policy responses are adjusted.
Investment Preparation
In Riße's view, investors shouldn't sell their stocks due to the Iran war itself. However, given the generally high stock valuations and the various risks posed by tariffs and ongoing geopolitical instability, a cautious approach may be prudent.
Investors need to monitor geopolitical developments, US foreign policy decisions, and central bank responses to navigate this volatile market and protect their investments.
Stock pricesUSAIranMiddle East conflict
Enrichment Insights
If the US enters the Israel-Iran conflict, investors could face a more volatile and uncertain economic landscape. Market volatility will rise due to geopolitical uncertainty, energy price shocks, and inflationary pressures. Sectors sensitive to energy prices will feel the strain, while energy producers may benefit. Safe-haven assets like gold and US Treasury bonds may see higher demand as investors seek protection amid increased risk. To succeed in the long term, investors must stay informed about shifting geopolitical circumstances, US foreign policy decisions, and monetary policy actions. [1][4]
- The ongoing US trade war, as outlined by capital market expert Stefan Riße, poses a significant risk to the economy due to the potential for tariffs leading to a recession, stagflation, and soaring inflation rates.
- For investors, it is crucial to keep a close eye on community policy, employment policy (given the potential impact of trade disputes on labor market dynamics and investment), business (to understand the effects of tariffs on various sectors), politics (to stay updated on US foreign policy decisions), and general-news (to remain informed about geopolitical developments and monetary policy actions) to navigate this volatile market and protect their investments.
