U.S. investors are setting up for a volatile session on Friday following the killing of a top Iranian military leader.
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Military tension – especially those in the Middle East -- have seen gyrations in the markets and the economy in the past.
Two weeks prior to Operation Desert Storm in 1991 with the threat of military action in the air, the S&P 500 fell nearly 5 percent. On Jan. 17, 1991 when the U.S. air campaign began the S&P went up 3.7 percent.
Oil rose in the run-up to the Iraq War – nearly 40 percent from December 2002 to March 2003 - but on March 16th when President George W. Bush gave Saddam Hussein a final warning, oil prices fell 24 percent.
As recently as August of 2017, the Dow, S&P 500, Nasdaq logged their worst sessions of that year as saber-rattling between the U.S. and North Korea reached new heights when a North Korean army commander told state media that “sound dialogue” was not possible with President Trump and “only absolute force can work on him.”
In a recent study, “Economic Consequences of War on the U.S. Economy,” The Institute for Economics and Peace an independent, non-partisan, non-profit research group analyzed major conflicts for the United States starting with World War II.
For the Afghanistan and Iraq Wars, the study reported, “This was also the first time in U.S. history where taxes were cut during a war which then resulted in both wars completely financed by deficit spending. A loose monetary policy was also implemented while interest rates were kept low and banking regulations were relaxed to stimulate the economy. All of these factors have contributed to the U.S. having severe unsustainable structural imbalances in its government finances.”