Market Effects of Paris Attacks

Market Effects of Paris
Attacks
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/stock-investing-tips/market-effects-of-paris-
attacks
The terrorist attacks in Paris took
a terrible toll of human life.

attacks
The fact that they were so
thoroughly planned and precisely
executed leads to concerns by
law enforcement professionals
that there may well be more to
come.

attacks
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As a result the market effects of
the Paris attacks have started
with a rush to safety.

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Bloomberg Business reports
that emerging markets
slide due to risk aversion.

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Emerging markets bore the brunt
of a clamor for safety as Europe’s
worst terror attack in more than a
decade compounded concerns
over deteriorating economic
growth and looming U.S. interest-
rate increases.

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A gauge tracking 20 developing-
nation currencies fell toward a
record and the MSCI Emerging
Markets Index declined to a six-
week low.

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Asian airlines tumbled on
speculation tourists will cut back
on travel to Europe, while Turkish
Airlines fell 1.6 percent in
Istanbul.

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Concern deepened that
geopolitical tension will curb trade
and slow global growth after least
129 people were killed in seven
locations across the Paris area
on Friday night.

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Russia’s ruble and Brazil’s real
gained with oil.

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The violence came at a time
when China’s slowdown has
curbed the outlook for trade flows
with other emerging nations,
while the odds for the Federal
Reserve to start raising rates in
December is undercutting the
appeal of riskier assets offering
higher returns.

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Chinese equities in Hong Kong
led declines on Monday as
mainland officials tightened curbs
on the use of borrowed money to
buy Chinese shares.

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From an investment point of view
our question is if the market
effects of the Paris attacks will be
temporary or are an introduction
to an ongoing trend.

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The question is if social and
political unrest and violence will
drive markets downward or if
markets will respond positively at
some point.

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What is the response to violence
and will that response help
economies and markets?

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Let’s look at defense stocks and
developing economies.

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Defense Stocks

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Barron’s writes that defense
stocks are ready a takeoff.

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This article was based on
technical indicators.

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However, a common response to
threat is an increase in defense
spending.

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After lagging the market most of
the year, the aerospace and
defense sector is poised to rally.

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Given how far it has fallen and
the pattern from which it is
emerging, several stocks in the
group are in great positions for
decent gains in the coming
months.

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The NYSE Arca Defense Index
recently emerged from an
inverted or upside-down head-
and-shoulders pattern.

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And after a small pause, it now
looks ready to break out to the
upside through its declining
March trendline.

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Although Barron’s is looking at
technical indicators we are
looking at the facts on the
ground.

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When a nation feels threatened
its leaders commonly increase
defense spending in response to
real or perceived threats.

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A look at the response to 9-11 is
instructive.

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Post 9-11 Defense
Spending

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The 9-11 attack in New York led
to the Afghan and Iraq wars and
greatly increased defense
spending.

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According to the Congressional
Research Service the cost of
Iraq, Afghanistan and other
global war on terror operations
ran to $1.6 trillion from 2001 to
2014.

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With enactment of the FY2014
Consolidated Appropriations Act
on January 1, 2014 (H.R.
3547/P.L. 113-73)

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Congress has approved
appropriations for the past 13
years of war that total $1.6 trillion
for military operations

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base support, weapons
maintenance, training of Afghan
and Iraq security forces,
reconstruction, foreign aid,
embassy costs, and veterans’
health care for the war operations
initiated since the 9/11 attacks.

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War in the Middle East has been
traumatic for the nation but
profitable for defense contractors.

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Keep this in mind when thinking
of market effects of the Paris
attacks.

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Emerging Economies

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As Bloomberg reports, emerging
economy stocks and currencies
took a hit after the Paris attacks.

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Our concern with these
economies is those nations that
are or will be targets of terrorists
and in danger of disintegration in
the months and years to come.

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In this regard the BRICS nations
are proposing a universal front
to deal with terrorism according
to the Economic Times.

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Leaders of the BRICS grouping,
including Indian Prime Minister
Narendra Modi, today called for
setting up an universal counter
terrorism front without any pre-
conditions to effectively deal with
the terror menace.

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“BRICS leaders believe it is
necessary to set up a universal
counter-terrorism front,” said a
statement by the group of five
emerging economies, quoting
Russian Foreign Minister Sergey
Lavrov.

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Developing nations are hurt when
investment falls and investment
falls off when nations become
disorganized and dangerous.

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To the extent that investors are
afraid to invest, the market effects
of the Paris attacks will be a
selective reduction of foreign
direct investment in various
developing economies.

Market Effects of Paris Attacks

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