If the reaction of equity markets to past U.S. intervention in the Middle East is anything to go by, any further selling in stocks ahead of a possible military strike against Syria could be short-lived.
According to Shane Oliver, head of investment strategy and chief economist at AMP Capital in Sydney, U.S. stock markets fell ahead of U.S. military intervention in Iraq in 1991, 1998 and 2003, and ahead of intervention in Libya in 2011. But they retraced all those losses within two months of the actual events.
So what's the implication for trade in markets today, as the U.S. looks poised to launch a missile strike against Syria for the suspected use of chemical weapons against civilians?
"Basically, shares could still fall a bit ahead of any strikes but once they [strikes] commence, stocks are likely to rally, particularly if it appears likely that any western military action will be limited," Oliver said.
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"Providing there is no retaliation by Syria or Iran in some way, which appears unlikely, this should further reinforce any recovery. Of course markets will then start to refocus on other threats such as taper talk from the Fed [Federal Reserve] and coming government funding and debt ceiling negotiations in the U.S.," he added, referring to other factors cited as risks to global markets in the weeks ahead.