War Is Good For the Market, So Is Peace, Or Baseball, Or Beer, Or...

Fearing that a possible escalation of hostilities in the Middle East could spill over to affect the US economy, stocks opened sharply lower on Monday. Gold, silver and crude oil futures were bid higher.

As the day wore on, stocks regained their footings, the precious metal and oil rallies evaporated and eventually all the US indices closed well into positive territory.

None of that was by accident.

Consider the stock market a proxy narrative for the American impulse emotions. Fear, greed, tranquility, volatility, are all rolled into one great tableau of the American experience, especially when there's trouble on the horizon. Monday's action consisted of mandatory panicked selling as the day began, the hand of calm mid-morning, and eventually the all-clear sign that nothing bad will happen, in a "we got this" kind of virtue-signal, sending stocks higher, where they're supposed to be going in our vast and glorious economy.

It all happens without public comment nor input because large shareholders control enormous amounts of stock and with that, the ability to move markets in whichever non-random ways they desire. A tweak to an algo here, a few well-timed block trades there, and entire averages can move in not-so-mysterious ways.

Especially since the disasters of the 2000 dot-com bust and the 2007-09 sub-prime implosion, there's been a vested interest in this country to keep the charts moving in a left to right, upward=headed, diagonal line.

That's not an accident, either.

Because there is so much wealth and so much of the future concentrated almost exclusively in stocks, the markets cannot be allowed to wither. We've witnessed this same happenstance over and over and over again, on a daily basis in times of crisis, and with a more elongated time expanse when it comes to policy issues like the direction of interest rates, presidential politics, tax cuts, or long-range unemployment trends.

If the US kills an Iranian general and some other people who happen to be in the wrong place at the right time, stocks may take a temporary hit. The Dow may drop 100 or 200 points, but it will be back on its game by the afternoon, or maybe within the next day or two.

If the US sends 200,000 troops to Iraq or Iran to squelch - once and for all - an evil regime, stocks may initially descend, but in the long term, they will outperform the underlying economy. See charts from 2003-2005 for example, of how the Gulf War boosted stocks out of a deep hole.

While it doesn't have to be this way, that's just the way it is, and the sooner one comes to the rationalization that the markets are handled, mangled, and managed, the sooner one can come to grips with the deficiencies in one's own portfolio.

Whether this is good or not is a debatable point, but what is not a subject ripe for speculation is the fact that holders of large amounts of underlying securities can make markets move in whatever direction they please. And for now, that direction - make no mistake about this - is up.

At the Close, Monday, January 6, 2020:
Dow Jones Industrial Average: 28,703.38, +68.50 (+0.24%)
NASDAQ: 9,071.46, +50.70 (+0.56%)
S&P 500: 3,246.28, +11.43 (+0.35%)
NYSE Composite: 13,941.80, +24.75 (+0.18%)