I read commentary this week from my favourite political analyst Ian Dunt. He is a brilliant writer, author and commentator on UK politics; blunt, sweary and honest.
In his piece he was articulating his surprise that stockmarkets weren’t reacting more to the US attacks on Iran.
As he comes from a politics specialism it is easy to see why the relative calm of the stockmarkets contrast so much with the world he inhabits.
Covering politics used to involve long periods of nothing happening, punctuated by the excitement of an announcement or if you were a lucky politics correspondent, a scandal.
In the last decade or so, this has changed into a constant stream of announcement, reversal, briefing, counter-briefing, and scandal after scandal after scandal. I imagine most commentators are physically aging faster than time is actually moving.
Partly this is a result of the new media and technology we have at our disposal. This provides instant reaction and views from someone in the world, regardless of whether they have anything useful to contribute. It is also partly a result of the way the economics of the media has changed. As we have stopped buying newspaper and the products advertised to us on TV, media companies have had to find other revenue sources. The Guardian has a huge endowment behind it and the Mail Group has a very profitable events arm. Everyone else is chasing ‘clicks and eeyeballs’ in a desperate race to the bottom.
The other factor is the Steve Bannon effect. Politicians have realised that you can starve your opponent of coverage and therefore oxygen if you say things that even a few years ago would be deemed beyond the pale (provided you say something else the following day so that the coverage never interrogates the content but just reports it and moves on).
The master of this is Trump, whether you like him or not (and many of the more ‘red in tooth and claw capitalism’ advisers in financial services do), he is very good at this game.
Some of what he says is false, some is stupid, some is outrageous and some is all three but it doesn’t matter because he keep saying it and it keeps getting covered.
And so to an attack on Iran that doesn’t seem to have either a plan or a purpose.
Politically and militarily, utter chaos.
And yet.
Stockmarkets are the collective wisdom of millions of investors and institutions who are deciding second by second (in high frequency traders pico-second by pico-second) what the shares in a company are worth. They don’t take a moral position on political events but do mind if there are economic effects.
Investors care if shipping can’t get through the Strait of Hormuz because this delays trade flows and adds transport costs. They care if the oil price is bouncing up and down because it makes it hard for companies to plan their production costs and therefore pricing. They care if inflation rises due to price rises.
So, this war will have an impact on the share price of a set of companies but so does every other major conflict, so does the ever more evident impacts of climate. It doesn’t change the fundamental point that companies will find a way to make a profit and you can be the beneficiary of that profit if you invest but not if you would rather sit it out.
If you are reading lots of breathless investment commentary about the Iran war at the moment, you are falling for the oldest trick in the expensive investment management playbook, fear sells.
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