How to Profit from Rising Geopolitical Tensions?

Welcome to the Investors Herald: It is 2020, and I will be utilizing the podcast more. I have to get out my thoughts on the market, and what’s really going on. It is the start of a new trading year, and investors are faced with an imminent dilemma. What is going on in Iran? Donald Trump ordered the killing of a major Iranian general who was plotting attacks on the American embassy. Now we are having threats sent back and forth that are scaring Investors. At first investors always get scared of the news but, during two of the worst wars in modern history, the U.S. stock market was up a combined 115%. And do I think this will even stem into a war? No. This is a short-term event. If you are a long-term investor, short-term events are irrelevant for your thesis. If you a short-term investor let’s talk about what is getting affected. Clearly, the price of oil skyrocketed. Why? Well, investors believe Iran will attack our oil infrastructure in the Middle East causing the supply of oil to diminish and with demand constant, prices will rise.

Now what ETF’s are positively affected: not many. But I do own ITA. IShares Aerospace and Defense. Since buying ITA on August 26th, 2016 I am up just over 70%. This is based off my thesis that America will never stop spending on National Defense and will keep increasing their budget. Events like this continue to push the stock higher. My thesis holds true and I will continue adding to my position in ITA. The #1 holding is Boeing which has been flat since the MAX incident, and ITA is nearing all-time highs which shows when Boeing recovers this will break out. The fund is filled with missile companies such as Lockheed Martin, United Technologies, and Raytheon. I believe ITA will hit $250 a share come the end of 2020.

Second ETF is iShares Gold Trust (IAU): Gold has been on a tear recently. Whenever geopolitical tensions rise in a country or anywhere in the world Gold becomes a hot commodity. This in turn affects any jewelry prices whether you have Rolex watches, necklaces, anything gold will increase when events like this occur. I do have a small percentage of my overall portfolio in IAU, but mostly prefer physical gold. It just seems right. Less than 4% of my total portfolio is in Gold, but it is a hedge against general inflation and I just really appreciate the commodity. It is never a bad idea to old Gold in times of rising conflict. I do believe Gold will reach $1600 by the end of January and then resettle to a natural level and plateau.

Now what gets negatively affected:

Obviously, anything that utilizes gas. Airlines took a major hit across the board. Really the whole market was negatively affected because people began trimming positions or rebalancing for the new year of 2020. I was shocked with the strength of some stocks, GE finished in the green (this stock is going to have a MASSIVE 2020) Lawrence Culp continues to do an amazing job as CEO. He turned the switch on Danaher, and you will all see when a CEO has his pay tightly compensated with the share price it will go higher. It’s his incentive and I love that, I am in GE, and continue adding monthly. Tech took a breather today with Apple selling off towards the close back under $300, that stock has been on a TEAR, and you know Monday without any wild weekend news will be in the green. Tech had an amazing 2019, really one for the history books. I believe the gains will not be as outrageous in 2020, but earnings growth will still be there, and we may see an average of 6-8%, so modest returns compared to what we are used too. I do believe these events in Iran will again be short-term and investors should not be making erratic portfolio moves based off these events at this point in the process. Of course, as new information is known investors should always do their independent research to see how to get the most returns out of the markets. Every security name was in the green today from Cyberark, Okta, Proofpoint, Crowdstrike, and Palo Alto Networks, I would consider adding one of these names because companies are spending on security and it is nearly the same thesis as my national defense ETF purchase, people will never slow spending once they spend a certain amount. They will only spend more. I will update when I pick a Cybersecurity name I am adding to the portfolio. Overall, these events show there is no need to instantly panic but watch the markets more closely and I will be providing more podcast information weekly so stay tuned for more to come. Also, on Investors I do have my active investments so feel free to reach out on Instagram and see what exactly I am researching and putting my efforts into currently. 2020 will be another amazing year investing.


© 2019 by The Investors Herald.

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