Bloomberg Audio Studios, podcasts, radio news, war, geopolitics, tariffs. How is an investor supposed to navigate their way through an environment where the US bombs Iran's nuclear sites, Israeli drone attacks have taken place in the Middle East, as well as aircraft bombing raids. All of this comes after months of noisy tariff announcements and walking those back geopolitical wrangling. What are investors supposed to do when a war breaks out?
I'm Barry Dheltson on today's edition of At the Money. We're going to discuss how to manage your way through war, tariffs and all manner of headline risks. To help us unpack all of this and what it means for your portfolio, let's bring in veteran markets journalist and CFA Sam Row. Sam's known for his clear, data driven insights into markets and the economy. He is a journalistic veteran who has
worked at Forbes, Yahoo, Business Insider, and Axios. His sub stack ticker was named by the Society of Business Editors and Writers as the best in Business for twenty twenty two. So Sam, let's start with something you wrote recently. Quote the US stock market has a long history of demonstrating resilience in the face of major geopolitical risk events.
Explain that, Yeah, I mean it's every couple of years or every couple of months. I think you and I, or you and your clients and me and my readers have the same kind of discussion. Some conflict breaks out fallatilly it comes to the markets. What are we supposed to do? And you know, of course, you know, as a human being, this is very scary. As someone who cares about or has friends and family connected to those events,
it's really distressing. And then you put your investor hat on and think about, you know, what does history tell us here? Now, obviously every event is going to be slightly different, but history also tells us that the markets seem to eventually look past this. Even with what's going
on in the Middle East right now. I think for as long as we've been alive, there's been some permutation of a Middle East conflict, and it's always been scary, and there's always you know, secondary effects in the financial markets, whether it's with oil prices or volatility and interest rates and currencies and all these sort of things. And I think for traders who are trying to weave in and
out of this. It's a big deal, and you really should be paying close up a tension to every development here. But you know, as someone who has to get somewhere in terms of retirement and long term savings or if you're saving for your college, your kid's college fund or something, you have to wonder, you know, what does five years out look like, what does ten years out look like?
What does even three years out look like? And you know, when you see some of these reviews of various geopolitical events in the past, there are some conflicts that go on for a very long time and may or may not have a sort of a longer term impact on the financial market. But for the most part, the market
hits tend to be very brief. I think I saw something from Deutsche Bank recently that reviewed something like thirty geopolitical events of the last hundred years, and from the beginning of the event that triggered, you know, the conflict to the bottom of the S and B five hundred on average, and the median stretches about fifteen days.
Fifteen trading days, essentially three weeks. So that's kind of interesting. You you said something not too long ago that I thought was intriguing, and I'm wondering if it was geared to investors or traders. Stocks usually look past geopolitical events, but these events shouldn't be ignored. How do you have it both ways?
Absolutely? You know, I think I think one of the mistakes that a long term investor can make is to try to pretend like nothing else is happening in the world. I mean, of course, you know this stuff matters, and you know we're going to fall news in our personal lives and all that kind of stuff. But you know, sometimes we want to just ignore all this stuff, especially if we have, you know, fifteen twenty thirty years until
we actually have to begin selling these stocks. But I don't know if that's totally healthy, because maybe the study says fifteen days till the market bottoms, but the study might also have a range of out comes where it might take three years till the market bottoms.
Fifteen days is the average, but that doesn't necessarily mean each time it's going to be fifteen days exactly.
So I think, you know, you definitely want to be mindful of the possibility that things can get worse, like even with what's happening right now. The markets seem to have bounced back pretty quickly all the time highs, all time highs. We're within reach of all time highs. But that doesn't mean, you know, there isn't going to be another flare up, you know, tomorrow, or next week or in a couple of months. So I think you have to be mindful of the fact that this stuff is
going on in the world. And then you go back to the history and say, hey, the odds actually say people want the escalation. People would rather not have violence out there, and that involves all parties. And so as long as there are more people who would rather not have violence than one violence, I think there's some gravity toward the escalation and a pullback and violent activity.
So let's delve into the history of we'll deal with tariffs in a little bit. Let's talk about war. There's a history of the last century of small wars, large wars, world wars. We have World War One and World War Two, we have the Korean War of Vietnam, Iraq in nineteen ninety one, and then Afghanistan and Iraq and three and today it's Imran, which seems to have been building. I don't know since nineteen seventy nine, when the hostages were
taken following the Iranian Revolution. How should investors, not in their personal or family life, but as stewards of capital, contextualize the dangers of war and the dangers of being frightened out of the market because of war.
You know, it's I was just having a conversation about this the other day about you know, this whole matter of you turn on the TV and someone will tell you, well, uncertainty is elevated today, uncertainty. It doesn't make sense that the market's so high because of all this uncertainty that's out there. Well, uncertainty just defines the nature of investing in the stock market. Right, if there was no uncertainty, you wouldn't get a great return.
Right if you want, if you want certain returns, you can get four point something on the ten year treasury.
Right exactly. But I was just thinking about, you know, the history of conflicts, especially you know, in the Middle East, and I remember when the Gulf War started in nineteen ninety and you know, I was eight years old and I was looking at the data and apparently that was a pretty rough time, both in the oil markets, and in the financial markets, and it was a tough time to to be an investor, you know, going through all this volatility, because you know, maybe this is it, maybe
this is the end of of of of all that. But then you know it's it's not long after that you realize that's actually an incredible time to start putting money into sam Rose five pointy. I wish my parents put money into a five twenty nine plant at that time, but they didn't. But again, you just look backwards and if there's any if there's a more powerful force than geopolitical tensions, it's going to be everyone's desire to want
things to be better. And even from like a business perspective, you know, they want better technologies, they want things to be cheaper, they want things to be faster, and that force that's driving earnings and profits and productivity and the economy and employment and quality of life, standards of living and all this stuff, you know, will continue to be the dominant force in the markets. So I think that's what people miss. Like if you were to be able to if you could put all that into like a
pie chart. Sure you have these flare ups and you know, geopolitical events, but the dominant forces, you know, remain.
That makes a lot of sense. You mentioned oil earlier in the nineteen nineties, and especially in the nineteen seventies. Anytime we saw a Mid East tension, that always translated into higher oil prices, which then pushed into CPI inflation driving it higher. Are we in the same set of circumstances today? Ever since the new fracking technologies in the two thousands and the United States just cranking out oil for the past I don't know, ten twelve years at
old time record rates. Does the US lesser dependence on Middle Eastern oil make it more or less likely that Middle East flare ups are not going to be as inflationary as they once were.
I think it's going to be not as inflationary as they once were. One of my favorite metrics that's out there is energy consumption spending as a percentage of personal consumption expenditures, and that was somewhere that was floating around
at about ten percent. Energy spending as a percentage of personal consumption household budgets, yeah, household budgets, yeah, about ten percent in the late seventies, early eighties, and that's steadily been declining and now it's closer to somewhere between three and four percent.
That's amazing.
Yeah, so energy, the direct spending on energy has has shrunk us significantly. And then past that, like you know, you know, the car you drive today is far more fuel efficient than the car you drove, you know, twenty years ago. So fuel economy has improved for you know, one of the biggest purchases of energy, which is gasoline for cars.
To say nothing about hybrids and evs.
Hybrids, evs. Your refrigerator is more energy efficient, the ac is more energy efficient. The the.
We switched to natural gas from oil, I don't know ten years ago. It costs a fraction of what oil costs and and pollutes less. And you know, as much as people say natural gas is a problem, it's certainly much better than coal, right, and better than oil.
Right right, right. Having said that, it can certainly have a psychological effect on consumers, especially, we can spend all day talking about how I get, you know, twenty five miles per gallon now as opposed to fifteen when I first got my driver's license. But when you see gas prices go from two fifty to three twenty five in a very short period of time. That affects you because that's immediately coming out of you know, whatever your Starbucks budget might be.
Huh, really interesting. So we've seen an argument pushing for home shoring. We'll bring these factories back to the US, We'll create all these new jobs. Is that realistic in the modern age of advanced automation, new technologies, artificial intelligence, and robotics. Are we really going to fill factories with workers or are we going to be filling new US based factories with a whole bunch of robots.
Yeah? I think I think there's several ways to answer that question, and in every way it's going to be No, We're not going to have a ton of home shoring. We might have some at the margin. Everything happens at the margins, right, some people, some people who are saving you know, point zero zero one percentage point. You know, manufacturing China might figure out a way to move to the US. But for the most part, it's not gonna be that much cheaper to move your manufacturing to the
US just because it was so expensive in China. You're gonna move to Vietnam, You're gonna move to Mexico, You're gonna move to Indonesia and all these other places where it might be more expensive than you know, China for instance, but it's still going to be cheaper than the US. So I think that's one of the unintended consequences of that. But as far as like what you're saying about AI and machinery and robotics and all this stuff, yeah, absolutely
that's already happening. And so it's a question uh that like I don't know, I don't know if you can fight that, right, like, unless unless you decide that unless there's a po I'll see that decides that there's a limitation on how many robots you can have in your factories are or I mean it's this is not we're not even talking about production manufacturing anymore, or goods production. We're also talking about services, right everyone in the service.
It's like AI has gotten to the point where it's not just affecting the assembly line. It's affecting people who go into an office and you know, go to meetings and strategize for their you know, their marketing departments or you know, if they work in banking, you know, suddenly you can cut a couple steps out of you know, putting numbers into an Excel spreadsheet.
Really really interesting. So last question, how can investors balance staying invested against all of these geopolitical risks, war risks, trade war risks, tariffs, and just unexpected escalations. How do they balance the need to stay invested through this against the potential downside risks of all these headline.
You got to study the history, and you got to look at the data, and you got to remember how bad things were at various points in history. Me personally, I like to keep a journal when bad things happen. I wish I had done this more actively during the financial crisis, but I didn't. I certainly did during COVID and something that I mean, you know, you can sort of get this by proxy through reading a really deep
account of various historical events. But reading my own memories or my own real time accounts of something like COVID reminded me that it always feels like the end of the world, and it lasts so much longer than you expected. Like, you know, I have you know, fifty pages here where
it's just like day after day after day. You know, we live in a new era where we're never going to be in the same office again, We're never going to meet anybody ever again, and all these kinds of things, And you know, it's something I like to do every once in a while, especially when things are calm. Right. It's one thing to be in the middle of a crisis and then study the history of crises and it's
like no, no, no, no, no, this time it's different. But when things are calm, that's probably actually the best time to go back and remember things like, well, here here's another I'm sorry to sort of keeping Oh no, I'm interested digress a little bit. I got a notification on Facebook saying that, uh, I think it was exactly fifteen years ago I submitted an idea for fixing the deep Water Horizon disaster. I don't know if you're if people remember this.
But that was Bpmico and and Feinberg oversaw this. Yeah, yeah, I recall that.
Yeah yeah, Gulf of Mexico and oil wall blows up and it's spewing oil into the Gulf of Mexico. Do you remember how long it was spewing oil into.
The golf sixty days some crazy three months? Yeah, ninety days, wow.
Three months that they were eventually able to put a cap in it, and it took I think it took another two or three months to officially say this thing was sealed. Right, It's insane how long this went on. Four But you know, everyone's memory is gonna be, oh, well, it was something in the past. It's like I remember it being three months. Oh, I remember being it could have lasted longer than two weeks.
But when you're in the moment in the humans live in the here and now, and when it's happening, especially day after day after day. It's funny you mentioned journaling during these things. I was essentially ended up writing Bail Out Nation in real time in public on the blog. I recall having a conversation with my trading desk back then, who were just like exhausted from the volatility. Everybody was making money, but it was exhausting. And there's this fantastic
line in Apocalypse Now. Do you remember the Charlie Don't Surf scene where Dval goes up to Martin Sheen and he says, with this wistfulness, you know, Sun, someday this war's gonna end, like disappointed, and when you're in the middle of it, it feels like it's never going to end. Financial crisis is never going to end. Deep Water Horizon's not going to end, the tariffs war are not going to end. But we always seem to come out the other side.
Yeah. And again, we just came out of COVID like we.
Were really felt like it was never going to end.
We were literally living a science fiction movie, like it's there's no there's no amount of money you can throw at this problem, Like you just have to pray that the science is going to be good enough that we figure out how to come up with a vaccine and contain this thing. But the amount, the scale of death was unbelievable.
Yeah, millions, millions of people America and tens of millions around the world.
Yeah, and yet this, you know, the economy has never been stronger and the stock market has never been higher. So I think, I think, listen, it's not to sort of necessarily downplay what's going on in terms of you and it's not just you know, uh, eron. We still have a war going on between Russia and Ukraine. It's not forget about that, right.
So it's the Middle East, it's Russian Ukraine. There are other hotspots going on Africa as well.
Yep and there's gonna be something else that's gonna flair up. That's inevitable. But you know, again, I think not the downplan of it. But to offer some perspective, it might help to go back and just sort of remember those times when things were really tough.
So to wrap up, we experience these geopolitical disruptions in a form of duality. As human beings. We are aware of the emotional turmoil of the toll in human suffering and just how psychologically damaging all these horrific events are. And yet at the same time we have to be good stewards of our own capital and recognize that this too shall pass. I'm Barry Riudt Halts, and this is Bloomberg's at the Money. You know you talk about