Russia has decided it wants to invade Ukraine, adding a log to the current fire in the Russo -Ukrainian conflict – as if the stock market needs something else to break things down. And while an invasion has yet to happen, intelligence reports suggest it is likely to happen this week.
Not surprisingly, since the news of the raid came out on Friday, stocks have been declining. But history says this could be a good time to buy a dip!
I know – like crazy. How good will geopolitical conflict be for the stock market?
Well, these conflicts don’t drive stock prices. Multiples of appreciation at revenues do. And, historically, geopolitical struggles have had little impact either!
Since 1940, tensions like this-like an impending Russo-Ukrainian war-have resulted in an average drawdown of only 4.6% in S&P 500 over a 20-day stretch. that’s nothing. Since 1950, the market has averaged nearly three 5% pullbacks per year. So these geopolitical conflicts fall under the category of “run-of-the-mill pullbacks that are good buying opportunities.”
That’s especially true if you go back to major geopolitical clashes, like Pearl Harbor and the attacks on September 11. Both of those were direct attacks on U.S. soil. But a Russo-Ukrainian conflict is far from there. So excluding those events, you’re talking about an average market drawdown-fueled by foreign geopolitical issues-of Only 3.5%.
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Where are we in the current selloff? Well, the news of an upcoming raid actually hit the tape around 1pm EST on Friday afternoon. The S&P 500 was trading at 4,480 at the time. Since then, it has dropped 2.4%.
In general, it is almost in what could be considered a “normal” return to markets from an offshore geopolitical conflict.
Time to buy a dip? you bet.
Don’t Be Afraid of Russo-Ukrainian Tension; Buy Dip
We are about three-quarters of the fourth quarter of revenue. And so far, the numbers are great. Nearly 80% of companies reported revenues higher than estimates. Nearly the same percentage reported earnings above estimates. And the cumulative revenue growth rate so far is more than 30%.
That’s some solid number. And we still have a few weeks to go!
At the time, we believed the stocks were rallying. Geopolitical fears will disappear. Earnings optimism will be the center stage. Stocks will move higher.
Therefore, we see the current selloff as a solid opportunity – especially in tech stocks because they’re crushing it in the face of this season’s earnings.
So far, tech companies are reporting more than 13% revenue growth this quarter, on average, along with 22% revenue growth.
Those strong numbers converge on some somewhat depressed appreciation across the sector, setting the stage for some major rallies in tech stocks.
See: Service Today (NYSE:NOW), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Advanced Micro Devices (NASDAQ:AMD), Snap (NYSE:SNAP), Pinterest (NYSE:PIN) etc.
We think, there will be many more mega-rallies coming to tech stocks in the next few weeks. And that’s why we’re talking about them now!
In particular, there is one, small $ 3 in tech in stock which we believe needs to be on your radar right now. Although 99% of people have never heard of this company, it works with technology that could change the world.
And if that technology makes big waves, this small stock will increase by thousands of percent.
Interested? Click here to learn more about this life -changing potential stock.
At the date of publication, Luke Lango does not (whether directly or indirectly) any positions in the securities mentioned in this article.