[There has been an increased] noise level very recently about US troops moving into Iraq and Turkey. I would really like to hear your take on market reactions if/when there is an escalation on the part of US. It seems imminent that this is the situation. I'd like to be better prepared to know how to prepare and respond for such an event! (March 2, 2002)
The rumors have been flying, and have struck two times when the indexes were having decent rallies. Short sellers have good timing. Anyway, if we do send troops into Iraq there will be uncertainty. Uncertainty about a new campaign while another is still ongoing, uncertainty about reprisal attempts, uncertainty about the outcome. The stock market hates uncertainty and they would most likely suffer selling as investors take money off the table and reallocate into some gold and cash. Gold stocks may perform a bit better at first and defense stocks as well. In the 1990 invasion of Kuwait gold spiked higher but then pulled back rather quickly. How fast a recovery comes depends upon the campaign's success. As we saw in 1991 and in 2001, if the success is apparent, the stock market starts to price that in.
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