Optimism is on the defensive at the moment because the world is a dangerous place. Dangerous, and getting more so with each passing day.
Danger is hardly new, nor is the capital markets’ capacity for digesting and pricing peril a recent innovation. Crises come and go, and the markets reprice as events require. And still the disciplined long-term minded investor manages to make a buck. No less will be true in the future, but no one said it’ll be any easier than it has been in the past. In fact, it may get tougher relative to the already challenging standard that has been investing in the 21st century. Indeed, as one looks out over the escalating warfare in the Middle East, it’s hard to see an endgame in the near future that leaves investor sentiment on the mend.
We’re talking, of course, about the war between Israel and Hezbollah, the guerrilla group in Lebanon. The accelerating conflict is wreaking havoc in the two countries, and raising tension in a region that’s already tense from the ongoing state of chaos, otherwise known as Iraq. Adding to the bull market in instability is long shadow of Iran, which has become increasingly confrontational in promoting its anti-Western agenda. Iran, courtesy of its massive petrodollar-infused bank account, has the means to back up its inclination to run interference in the West’s (read: America’s) political agenda in the Middle East. That includes funding Hezbollah, which reportedly draws no trivial degree of financial help from Iran.
‘Tis easier to tear down confidence than it is to build it up. To the extent that such disorder and bedlam serve wider political objectives, pursuing turmoil and confusion is path that’s tragically easy to follow and difficult to repair. Investors the world over must understand this risk, even if it only informs only partly informs their decision-making process.