Investing During Wartime (A Look Into the Past And Present)
Your heart and soul are truly with the Ukrainians in their fight for their homes and freedom. You’re also scared for your own future, your own home, your own freedom. The potential impact to your finances is a concern, along with the current crippling inflation, outrageous gas prices, an uncertain economy, and a volatile stock market.
This article navigates financial uncertainty by answering the questions that come with the anxiousness of watching a world tragedy unfold. Let’s get down to it with a common question..
Is War Good For The Economy?
Historically, yes. BUT, war is expensive. With increases in military spending comes government debt escalation, which can lead to even worse inflation woes.
On the other side of that coin, our government leaders are adamant that America will take a passive approach to this war through economic sanctions. Even so, investing during wartime is already benefiting the aerospace, defense, and weapons industries.
Unemployment rates may also decline, and fast-tracked technological advances will positively impact our struggling economy, and the world.
On that note…
What Do The Financial Markets Think Of War?
Both the equities and crypto markets are currently falling. The volatility of the market right now is as unpredictable as ever. Changes occur hour by hour. But, a clear opportunity for profit is definitely there.
To find it, you must consider how previous generations used investing during wartime to their advantage. Let’s break it down…
The Stock Market During The Civil War
The stock market during the Civil War was dominated by financial (banking/insurance) stocks, and industrial (manufacturing and transportation) stocks.
While financial stocks either floundered or flourished, investors moved to the more stable industrial sectors. That was a definitive factor in the outcome of the Civil War. The Union won with the help of highly financed factories and railroads that the Confederacy lacked.
The Stock Market During WWI
Investing during wartime in the early 1900s was interesting, to say the least. The New York Stock Exchange temporarily shut down during WWI after foreign investors sold off their investments in order to fund the war effort. Stock exchanges across the world quickly did the same.
Liberty Bonds stepped forward with a brilliant advertising strategy appealing to American patriotism. Billions of dollars in defense bonds were raised.
The connection between manufacturing and war brought a boom to the economy, but once the war was over, the recession preceding the Great Depression began. It was during that time that a popular radio reading of H.G. Wells’ book ‘War of the Worlds’ was misunderstood to be actual news, causing mass hysteria and an even more severe dip in the markets.
The Stock Market During WWII
The Great Depression ended because of WWII. The Dow Jones Industrial Average swiftly turned from maximum bearishness to strong bullishness again, due to the defense industry’s expansion.
Liquidity and safety also became important to the investors of that era, so gold became a much sought after diversification tool.
The boom continued long after WWII. The markets continued to see a steady climb to reach new peaks by 1954. It was a great time to be an investor.
The Stock Market During Vietnam
The markets thrived during the first few years of Vietnam. Despite the societal upheaval of the 1960s, investing during wartime proved to be profitable in the beginning. Despite labor strikes and violent protests, the money supply under the FED expanded, strengthening the economy.
The markets only saw a decline in 1969, when Nixon took office. Inflation, interest rates, and unemployment brought a swift recession. Nixon’s decision to suspend the conversion of dollars into gold in an attempt to assuage inflation only increased “Nixon Shock,” and led to the stagflation of the 70s.
The Stock Market During The Korean War
The ambush that started the Korean War caused the markets to tumble drastically, but as the resulting GDP rose, so did equities.
By the time the armistice was signed, corporations that dealt in jet engines and bombers were the clear winners.
The Stock Market During The War On Terror
The loss of the financial firms in the World Trade Center Towers caused the stock market to close for nearly a week. When it reopened, the value of grounded airlines and insurance companies that were slammed with claims fell drastically.
Conversely, the price of oil spiked, along with energy stocks. Gold also proved to be a safe haven once again.
The effects of the devastation of the September 11th attacks continue to weigh heavily on the US economy.
There you have it. The history of war on the markets. Let’s take a look at modern stocks that may thrive in the current world climate.
Stocks That Rise During War
Aerospace and Defense
Lockheed Martin and Raytheon are already seeing higher highs.
Boeing hasn’t yet seen the short-term growth as Lockheed and Raytheon yet. Some investors would see that as an opportunity.
Textron is the manufacturer of Bell helicopters. It has moved above it’s 50-day moving average.
The Invesco Aerospace and Defense ETF has broken past a previous high.
The CEO of Intel was a guest at the State of the Union Address. Combine that PR blessing with the new factory being built, and a computer chip shortage, and you may see a breakout.
Garmin is a leader in GPS technology, and it’s worth serious consideration to some investors.
The major tech players like Apple, Microsoft, and Alphabet are popular options that usually don’t let investors down, and could see spikes in times of war.
If ETFs are your thing, check out Invesco QQQ.
Supply chain woes don’t seem to be hurting the freight and logistics industry.
Shipping companies UPS, DHL, Union Pacific Corp, TFI International, and Starbulk Carriers all deserve some further investigation.
iShares Transportation ETF does well.
The Main Takeaways
The Ukrainians and the entire world may have a long and terrible road ahead. There is no doubt that this war will have a lasting impact on many different aspects of billions of people’s lives.
With the uncertainty of the future, it’s important to focus on opportunities where others only see tragedy. By investing in sectors that thrive during war, some investors may be able to lessen, and even improve the financial impact war may have on their finances.
History teaches us that now is the time to research war-profiting industries and corporations. Gold and bonds should be examined. The SPDR Gold Trust , and Vanguard’s Total Bond Market ETFs can provide exposure to those markets.
History also teaches us that human resilience in the face of adversity is a force with which to be reckoned. May Ukraine find victory.
*Legal Disclaimer: This article is provided for informational purposes only, and should not be construed as a recommendation to transact in any investment. All investment decisions you make should be based on an assessment of your risks in consultation with your investment adviser.