During each world war, the stock market goes into overdrive for days, sometimes weeks. Shares fall, but other stocks may benefit. Newspaper Trained with Luc Girard, Portfolio Manager at Desjardins Securities.
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The first thing to know: Fluctuations during war are completely normal. Depending on the size, they will disappear after a few weeks and the stock market may see a quick rise.
“Historically, conflicts have caused a lot of tension and instability, but it has been short-lived. In the medium or long term, it has had no influence and investors will return to the basics,” he said. Girard.
However, some sectors have been praised by investors as tensions between Russia and Ukraine have escalated.
natural resources
“When there was a crisis, we looked at everything from oil companies, to natural resources, to edible resources, to wheat,” the manager explains.
The price of cereals reached a historic level even before it receded yesterday. Wheat rose 7% in a week, while Ukraine and Russia were the two largest producers.
“There can be an imbalance between supply and demand, so prices will explode at that time,” he said. Girard said.
Probably not for long
Among oil companies, shares of Shell (+ 2.45%), ExxonMobil (+ 0.88%) and Chevron (+ 5.93%) have risen over the past five days.
The Department of Defense also stood alone. Lockheed Mart, the world’s number one military, has had a thunderous week with a 5.2% increase in action, such as Radeon (+ 4.2%), General Dynamics (+ 6.7%) or Thales (+ 8.14%).
Manufacturer Boeing, on the other hand, also has a military division, but civil aviation also fell more than 5% during the week.
“These stocks performed well in the news of the geopolitical conflict. But will it continue or stop? At this point, these bonds are performing well, but may be profitable in the coming days,” the manager assures us.
In Quebec, players such as Héroux-Devtek (+ 1.5%) and CAE (+ 0.9%), who have contracts in the defense sector, benefited most moderately from the conflict.
Back to basics
But all could quickly change depending on the intentions of dictator Vladimir Putin, and investors may return to more fundamental values.
“The market may return quickly and we will return to normalcy in the economic cycle because we think the economy will not fall. At this time, investors are moving towards financial and industrial resources, health and consumption,” the manager concludes.
“In the last two days, the stock market has been recovering. We went for the exaggerated stock market revision. We feel that maybe the crisis will be resolved soon, ”he said. Girard concludes.
Weapons Benefits!
Five day increase
- Lockheed Martin: + 5.2%
- Radeon: + 4.2%
- General Dynamics: + 6.7%
- Thales: + 8.14%
