Editor’s note: Marc Leavy,CFP? is a regular financial columnist for Business Reform Magazine, the leading Christian business magazine with over 100,000 readers. Each issue features practical advice on operating successfully in business while glorifying God.
The stock market responded well to the “shock and awe” campaign by raising over 700 points in a week. Friday marked the eighth straight day of gains. It was the first time since the late 90’s the market continued such a positive streak and it was the best week the Dow has had since 1982.
You may have thought you had night vision on when looking at all the green numbers the markets registered this week. Many of the major indices moved into the positive column for the year.
The stock market did not affirm war but merely responded positively to the removal of uncertainty. Markets abhor uncertainty, which is why they began to rally when the President made his intentions clear. Then the markets rallied further when it looked like Saddam and his leadership may have been taken out early. They continued to respond when the bombing campaign appeared to go well, and also that there were no instances of bio/chemical warfare. All these events signaled a quick end to the uncertainty of war.
The Gold bugs “bought the rumor and sold the news” dropping gold more than $20 since the beginning of the month. Gold futures also fell as well for their seventh straight losing session.
The Dollar received a vote of confidence and was strengthened as more and more nations came to join the “coalition of the willing.”
The Federal Reserve decided to wait on its decision to lower rates. The Fed seemed optimistic that once war concerns are gone, the economy would continue to strengthen. They will not meet again until May 6th but may still cut the Fed Funds rate before then. The Fed fund futures have already discounted a rate cut.
Oil prices dropped dramatically on the invasion. Ironically, OPEC (Organization of Petroleum Exporting Countries) began at a Baghdad conference in 1960 and was then recognized by the UN in 1962. (UN involvement is always a good sign of a bad idea.) OPEC is a global Federal Reserve Board for oil. They attempt to keep prices stable. In other words, they try to keep prices as high as possible without triggering too much complaining.
Oil fell to $26 a barrel, a four-month low, as British and American troops secured key oilfields. Allied control over the oilfields will weaken OPEC’s hold on world oil.
The financial stocks reported higher profits, signaling strength in an important sector of the market. Mid and large cap growth stocks are leading the indices so far this year. Corporate earnings have been increasing this year.
After the war, Consumer Confidence should improve and we should see more capital spending triggering job growth in the second half of the year.
King Solomon remarked, “A wise man attacks the city of the mighty and pulls down the stronghold in which they trust.” Saddam Hussein was simply a dictator. Unfortunately, the oil wells made him a rich dictator. By securing the oil fields, his source of power is pulled down and that valuable resource will be used to bring prosperity to a people who have known only poverty and oppression. “Peace activists” who chant “no blood for oil” do not realize it was Saddam who used the blood of his people to protect his oil. Now, the city, Baghdad, is being attacked and everything Saddam trusted in is being destroyed so that peace may come. Already the Iraqis are beginning to chant “Bush” and “America”. It must be hard on Tom Daschle.
Marc Leavy, CFP? is a Certified Financial Planner. Principled Investing teaches Solomon’s principles of investing and offers wisdom regarding comprehensive financial planning. You may contact Marc at [email protected] or visit www.principledinvesting.org.
