https://www.wsj.com/articles/war-always-muddles-markets-stocks-volatility-investing-11647783501
Wars perplex investors. I’m always slow to react. Back in my days as a Wall Street analyst at Morgan Stanley, we would bus top investors around Silicon Valley to see Apple, Intel, Adobe, plus Jim Clark at Silicon Graphics, Scott McNealy at Sun Microsystems and even Steve Jobs at NeXT. Breakfast on Aug. 2, 1990, was disrupted by news of Iraqi tanks rolling into Kuwait. Even though the 1990s proved to be paradise for technology, most investors rushed back to New York. The stock market dropped 6% over three days.
My office in Manhattan was next to Wall Street’s top oil analyst. That fall, he studied data from the world’s producers and spoke at Morgan Stanley’s morning meeting. Armed with tables and charts, he basically declared that world demand was X million barrels a day, but without Iraq, there was only Y amount of oil production, so prices were going to rise for the next decade. Sound familiar? I watched salesmen peel out of the room to call their clients. It turns out he was spectacularly wrong.
The rest of 1990 was awful. The market dropped 21% from its July peak to its October low. Fearing terrorists, few were flying. The economy went into a recession. Companies missed on earnings. Uncertainty hung over markets. On Jan. 16, 1991, the companies I was recommending with buy ratings, such as Intel and Motorola, reported awful earnings. That night, like everyone else, I watched Operation Desert Storm unfold on CNN. Still, I dreaded the next day’s morning meeting, where I would have to cut my earnings estimates and eat crow as my stock picks tanked.
As I got off the elevator, the head of sales grabbed me by the arm and started shouting, “It’s dawn in America. We’re shooting missiles right down chimney stacks. Cruise missiles are making left turns down city streets. The market’s going higher. Tech is king!” Sure enough, the market was up before the open. All my stocks were bid up 20% or more. Dawn indeed. It certainly cheered me up.
Markets during wartime are confusing. Baron Rothschild’s line about buying when there is blood in the streets and selling to the sound of trumpets is a great contrarian battle cry. Sometimes it works, often it doesn’t. Although I know some Russian banks today that you can buy real cheap.
The New York Stock Exchange closed from July to November 1914. Stocks dropped nearly 25% when they finally started trading on Dec. 12.
