Monday's Markets Update (October 9, 2023)

09 Oct 2023 by rate3

On Monday, the Nasdaq rebounded on technicals despite lingering concerns over the Israel-Hamas conflict and rising oil prices weighed on markets. Tech stocks mixed, with some stocks down and others up. Travel stocks declined sharply, with Carnival, United, Delta, and American all down more than 4% due to fears of travel disruption. Energy stocks surged, with Exxon Mobil and Chevron up more than 3% each. Defense stocks also saw gains, with Northrop Grumman, General Dynamics, Lockheed Martin, and Raytheon Technologies all up over 4%. BTC and ETH declined on concerns over a possibility of more rate hikes, prompted by higher energy prices from the potential escalation of the Middle East conflict. Other news: Crypto investing decreased 63% in Q3; Tornado Cash remains the top Ethereum network crypto mixer, despite harsh government persecutions.

Comment: Investments In Times Of Global Wars.

Historically, stocks have displayed a remarkable capacity to maintain their value even during major conflicts. Analyzing data spanning World War II, the Korean War, the Vietnam War, and the Gulf Wars, it is apparent that the average return for large-cap stocks during these tumultuous periods stood at an impressive 11.4%. Thus, for those with a long-term investment horizon, equities can be a prudent avenue for wealth preservation and growth during times of war.

An industry that often thrives amidst the backdrop of war is the defense sector. Companies involved in the production of weapons and armaments tend to fare well during wartime environments, as governments typically bolster their defense expenditures. Furthermore, energy companies may also experience an uptick in performance during times of conflict, as the demand for energy resources can surge in response to geopolitical tensions.

For those with a penchant for a more aggressive approach, short selling presents itself as a potentially lucrative strategy in a bear market, specially for industries prone to a sharp downfall during wars, such f.e. as tourism and airlines. Additionally, employing options strategies, such as buying puts, can be an effective means of capitalizing on a market downturn, as these instruments gain in value as the market experiences a decline.

It is essential to underscore that these strategies, while grounded in historical data and financial wisdom, are not foolproof and may not universally apply to all situations.

Crypto

Crypto funding plunged 63% in Q3 2023, with VCs investing just $1.9 billion, according to Bloomberg.
Despite Treasury Department sanctions in August 2022, Tornado Cash remains the top Ethereum network crypto mixer. Recent data shows $77.35 million passing through its Ethereum Mainnet contracts in the last month. The mixer spans seven chains and enables users to conceal transfers of ten crypto assets, with ETH on Ethereum being the most used. Although it saw a drop after sanctions, it previously handled over $700 million in ETH at its peak in July 2021.
Comment: How Do Wars Influence Crypto Markets?

Several studies have undertaken investigations in this domain, attempting to discern patterns and trends. Most of them posit that the the recent war in Europe may be an explanatory factor behind the recent downward trajectory in cryptocurrency prices. However, it is essential to approach these findings with caution and a degree of skepticism.

As an illustration, examinations of the SP index reveal that although there was initial uncertainty during the first month of the conflict, the market typically began to exhibit positive trends after three months. In 75% of instances, the SP 500 showed positive performance twelve months following the military event. Crypto markets have been highly correlated with stocks during past two years (f.e. the correlation between Bitcoin and the S&P 500 was 0.8 on August 25, 2023), so they might exhibit the mentioned SP's dynamic in a future.

Overall, the higher volatility is the most plausible scenario as traders will be faced by growing geopolitical risks and an economic ambiguity on both crypto and stock markets.

Beyond the realm of trading volume and price dynamics, the war has showcased the multifaceted role that cryptocurrencies play in contemporary geopolitics.

On one hand, cryptocurrencies have been employed for malicious activities, including ransomware attacks and sanctions evasion, underscoring the challenges posed by their pseudo-anonymous nature.

Conversely, cryptocurrencies have also been harnessed for positive purposes amidst the conflict. They have facilitated donations and aid contributions to those affected by the war, highlighting their potential as a means of circumventing traditional financial intermediaries and enabling direct peer-to-peer transactions. Additionally, cryptocurrencies have served as a reliable store of value for individuals and businesses in war-affected regions, offering a degree of financial stability and autonomy amid economic uncertainties.

Moreover, cryptocurrencies have contributed to reducing cross-border transaction costs and fostering financial independence, particularly in emerging markets.

To sum up: Cryptocurrencies have emerged as both a tool and a battleground in the conflict, serving diverse purposes and offering a mixed bag of benefits and challenges for citizens in the warring nations.