Financial markets that were initially spooked by US missile strikes against Syria may have settled down, but that doesn’t mean investors are just taking things in stride.
Futures on the S&P 500 Index fell as much as 0.7 percent in the hour after Thursday night’s attack. However, they’ve since all but erased their losses and were down 0.02 percent at 11:01 a.m. in New York. The S&P 500 was essentially flat at 2,356.21.
Oil reacted as well. After jumping to a one-month high, crude prices have fallen back close to where they were before the assault.
The Syria trade is also fading in the currency and bond markets, with the dollar rising slightly after an initial drop, while Treasuries pared their gains.
Still, some fund managers and traders say they’re not letting their guard down.
Ian Lyngen, a rates strategist at BMO Capital Markets said: “We don’t want to go home short over the weekend given the Syria event-risk.”
Meanwhile, David Kotok, chairman and chief investment officer at Cumberland Advisors Inc., said his firm just raised cash to be defensive.
The bombing added a layer of uncertainty to financial market that are already grappling with policy quandaries from U.S. President Donald Trump’s pro-growth agenda to the pace of the Federal Reserve’s tightening schedule. Here’s what some investors and analysts are saying about the effect of U.S. military activity in Syria on their market views as Trump meets with China President Xi Jinping.
David Kotok, head of Cumberland Advisors, said: “One cannot know the extent of a shooting war or a military action until it happens, and then one cannot know the outcome until it becomes clear. One can act on early signs or discernible trends.
“That this incident has occurred just as the leaders of the two largest economic forces in the world are meeting in Mar-a-Lago is an incredible coincidence of timing. But it is also a reality check on the world situation, which we believe is at a high-risk point.”
Anders Faergemann, senior fund manager in London at PineBridge Investments, which oversees about $83 billion globally, said: “For me, the big question relates to the role of Donald Trump as U.S. President and how it may impact economic sentiment. The markets have built up a lot of optimism about tax reforms and prospects of stronger growth, but if Trump realizes he won’t be able to push through reforms and allows himself to be distracted by foreign policy, there is a risk that the enthusiasm we have seen in survey data may start to wane.”
Shamaila Khan, director of emerging markets at AllianceBernstein, said: ““There’s been a response, but it seems to be a surgical strike.
“I think the market reaction has been reasonable because it may just be a one-off. If he continues with using chemical weapons there’s definitely a risk-off escalation. I think the market is getting more comfortable with this not-going-to-escalate scenario.”
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