After a banner year in 2019, Wall Street is off to a volatile start to 2020, due mainly to the growing hostilities between the U.S. and Iran. The Dow Jones Industrial Average lost 120 points Tuesday, led mostly by declines in oil giants Chevron and Exxon Mobil. That was before Iran launched missile attacks on U.S. military sites in Iraq, further ratcheting up tensions between the two countries.
All of this international drama creates what financial markets hate the most---unpredictability. "Uncertainty leads to volatility, and we have plenty of that to start 2020," says Derrick Kinney, Sugar Land-based personal financial educator. "The Middle East is often like holding sand in your hand---it has no shape and often goes in many different directions, and investors are faced with that uncertainty right now."
Since the overall economy remains strong, it's likely that any hostilities in the Middle East will largely affect stocks in companies that have direct interests there...and Kinney believes that could present a buying opportunity for savvy investors. "Think about companies that invest in oil, that produce and refine oil, or think about airlines," he says. "All of those types of stocks that may be down because of the price of oil and concerns about it...those might be stocks to think about."
Overall, Kinney says investors should remain patient and not make any panic moves based on daily developments out of the Middle East. "We've not seen the end of this potential conflict in the Middle East," he tells KTRH. "This may drag on for awhile, so investors may want to sit on the sidelines patiently, and then gradually ease money in as they're comfortable."