Rolling with the punches

Jan 14, 2020 | Jay Zhang


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Geopolitics came roaring back to center stage as the U.S.-Iran conflict threatened to become an all-out war. But markets were not overly rattled by the saber-rattling.

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Following a stellar 2019, with the S&P 500 delivering its secondbest annual return of this bull market cycle, equity markets have received a geopolitical wake-up call to begin 2020. The U.S. drone strike that targeted and killed Iran’s top general, and Iran’s retaliatory ballistic missile strikes on U.S. military bases in Iraq, put equity markets on edge at times—that is, until details about Iran’s strikes emerged and both sides attempted to de-escalate. Overall, financial markets have not reacted much to the U.S.- Iran conflict despite the serious nature of the developments and meaningful risks that linger. Are they too complacent?

 

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