Autumn markets: Syria crisis isn't the only cloud in the sky
What the experts are saying about the Syria effect - and the next round of European bailouts
THE CRISIS in Syria has so far failed to spark turmoil in global markets – with good reason, said John Stepek at Moneyweek.com. "Syria, like every other saga of pointless human suffering, is a terrible thing." But, in investment terms, it's "a distraction". We're nowhere near a stage "where this directly affects the global economy in any significant way".
Last week's market sell-off was simply a continuation of the jitters investors have had all summer. An event like Syria gives them "psychological permission to take some money off the table". But what they're "really worried about" is the US Fed "tapering off" its stimulus, which could happen as soon as this month.
Don't be so dismissive of Syria effect. The Syrian threat shouldn't be dismissed so lightly, said Brenda Kelly of IG in City AM. "As long as uncertainty prevails, we can expect to see a loss of appetite for risk assets." Mere speculation about military strikes saw "a sharp uptick in the price of Brent Crude", which hit a six-month high of $117/barrel.
If the conflict spreads and disrupts oil supplies, it could have a big impact, said Julian Jessop of Capital Economics. "A further rise to, say, $150, could knock one per cent off global growth, turning a lacklustre recovery into something approaching stagnation." Still, it's "hard to see the circumstances in which oil prices would rise anywhere near this far".
Autumn brings other risks, too. After last week's falls, stock markets have recovered some of their mojo, but the "risk positive" mood may prove fleeting. Uncertainty in the Middle East has added to a general sense of autumn foreboding. "Since 1950, September and October have been the worst months for shares, thanks to crashes," said James Mackintosh in the Financial Times. And US equities are looking historically expensive.
"A full crash seems unlikely, but the autumn brings a series of risks, any one of which could dump a full load of manure on the market." From the Fed's tapering, through the naming of its new chairman, to the annual ritual of budget gridlock in Congress. Meanwhile, there's talk of "the next round of bailouts in Europe". It could get choppy. ·