Last weekend, Iran launched hundreds of drones and missiles against Israel. This direct military strike from Iran against Israel is unprecedented. Israel will respond, but how and when are unknowns.
To date, market action is remarkably sanguine, given the heightened military and economic risks flowing from the attack. U.S. equities have traded modestly lower, not because of the attempted assault on Israel but because U.S. equity markets were overbought. The equity markets were due a correction and some consolidation; that is what is happening. What is surprising, however, is those “knowns” which create real measurable risk and, in turn, how some asset classes are not behaving as common sense would suggest.
As a hedge against the outcome of Israel’s response, the market should logically buy large oil companies with very strong balance sheets and diversified asset portfolios….
