The war in Ukraine goes on, and since it began Russia has absorbed a series of embarrassing defeats and setbacks, including most recently the sinking of one the ships in its Black Sea fleet. The stout defense of Ukrainians is heartening for those who oppose evil aggression and the slaughter of innocent civilians, but it also has raised the possibility that Vladimir Putin might be tempted to do the heretofore unthinkable: launch some kind of nuclear weapon. Ukrainian President Volodymyr Zelensky warns that the world should be prepared for precisely that inconceivable scenario.
It’s a frightening time, for sure. And yet, things haven’t been as panicky as you might have thought. No one is hiding under the bed or encamped in their home fallout shelter. People live their lives and go to their schools and jobs, the economy bumps along, we worry about inflation and gas prices and shortages, and stocks continue to be traded. In fact, when you think about it, the stock market is pretty weird right now. Frightening times typically are bad for the stock market, which always reacts badly to uncertainty–and yet the market has held its own, even as concerns about the Russia-Ukraine conflict escalating to the nuclear level are raised. Why is that?
Paradoxically, it might simply be that the possibility of nuclear war is just too scary to really affect the markets. It’s too colossal a risk, and far outside the normal issues that affect trading in securities. If you’re worried about inflation, you can adjust your portfolio and trading patterns; if you’re concerned that equities are overvalued due to irrational exuberance, you can shift into fixed income investments. But there is no plausible investment strategy that can protect against the devastating impact of a nuclear exchange.
That’s why some analysts are encouraging their investors to stay bullish on stocks, even in the face of the risk of Putin launching nuclear weapons. One Canadian firm, BCA Research, recommends staying in the equities market for the next year, reasoning that financial risks are immaterial in the face of a potential existential risk. One article quotes BCA Research as saying, bluntly: “”If an ICBM [Intercontinental Ballistic Missile] is heading your way, the size and composition of your portfolio become irrelevant.”
If you were searching for evidence that financial analysts are cold-blooded, look no farther! But, in a strange, counterintuitive way, this apocalyptic approach to investing makes sense in the current circumstances–and it may be why the market hasn’t plunged into Black Friday territory. The BCA Research approach might seem like the caterpillar approach from the fable of the ant and the caterpillar, but what else can an investor do? In such extraordinary times, the best approach may be to keep your head down, follow your investment strategy, and hope that Vladimir Putin keeps his finger off the button.