American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

May 2024 – Geopolitical Turmoil

Geopolitical tensions continued to dominate headlines in April. Iran launched a direct attack against Israel, and Israel retaliated shortly thereafter. In global markets, oil and gold prices were volatile, though the impact was short-lived as any meaningful price changes reversed course within days. Stock markets wavered in the weeks around these events.

The direct impact of any news item on the stock market cannot be accurately measured. However, ongoing geopolitical events affect investors’ expectations regarding peaceful international trade, capital flows, and global prosperity in general. Geopolitical stability is currently as precarious as it has been in decades. Beyond the Middle East the world is witnessing a drawn-out war between Russia and Ukraine. Meanwhile China is reverting to its authoritarian past and is overtly threatening Taiwan.

We have often written about rational investing in an uncertain world. In February 2022, following the Russian invasion of Ukraine, we wrote:

“This news from Ukraine is deeply disturbing. Yet history demonstrates that discipline is indispensable during such times. Emotions will inevitably run wild as our minds consider the worst possible scenarios, but prepared investors need not panic.”

From the end of February 2022 through the end of April 2024, the total return on the S&P 500 Index has been almost 20 percent.2 Long-time readers may recall that following the attacks on 9/11 we similarly counselled investors to stay the course.

No matter how dire the outlook seems, diversification can be relied upon to reduce risk. For example, oil stocks are highly sensitive to emerging news in the Middle East, but the market’s reaction is far less certain. Will crisis in Israel meaningfully impact the earnings and growth potential for Apple, Microsoft, or Wal-Mart? Oil prices may indirectly impact their future bottom-line earnings, but it is doubtful that oil price spikes and reversals will meaningfully affect investors’ assessment of their share prices.

To be clear, we are deeply concerned by recent trends in domestic and international news. Those who wish to save and invest in hopes of a prosperous future cannot escape these realities. But they can pursue an optimal strategy based on earnest assessment of past market behavior. Those who have planned carefully can tune out the noise and proceed with confidence.

Also In This Issue

Beyond Savings Accounts
Secure 2.0 Creates New Backdoor Roth Opportunity
Evaluating After-Tax Returns
Investment Guide: Earlier Delivery And Timely Information
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles

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