BOSTON (CBS) – We can’t pretend to know what’s going to happen in Syria. The president now says he hasn’t even made-up his mind and the intelligence community says the case against the Assad regime is “not a slam dunk.”
But the financial markets don’t work that way.
They price-in the worst case scenario and then adjust if things if they end up better than expected.
That’s why the price for crude oil hit a two-year high this week.
But it’s interesting that we have not seen a significant jump in gas prices – at least not yet – and there are a couple of reasons for that.
First of all, the summer is ending. This is the last big driving weekend of the season and prices typically drop with consumption after Labor Day. It’s also the time of year when cooler temps mean less pollution and refiners switch to cheaper winter blends of gas.
Hopefully this will keep prices at the pump under control. But the run-up in oil prices could still be a big problem for Wall Street. And that’s to be expected.
Uncertainty is Wall Street’s greatest enemy and we have a lot of it right now. Oil prices are certainly not helping.
But history tells us things will get better and quickly.
USA Today compiled data from three Wall Street firms, looking at what happened before and after other limited military attacks like the ones in Bosnia in the mid-90’s, in Iraq and Serbia in the late 90’s and more recently in Libya.
They found that stocks lost an average of 1-percent ahead of those actions before bouncing back by about 3-percent within a month.
But most analysts agree that if an attack on Syria were to spread into a regional conflict we can all forget history.
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