waiting for the war rally?

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    If you are one of those waiting for the big stock rally when the US attacks Iraq then Terry McCrann raises a few interesting points in todays papers.

    Alan Schoenheimer the Aussie head of Russell a company responsible for over $3 trillion in investments worldwide has an interesting peice of research complete.

    I've been wondering about these war rallies. Have you? Well they have researched them back to the 1940 fall of France to Hitler and guess what?

    In over two dozen examples cited there were only two situations where the initial market reaction was NOT negative - extremely negative in many cases.

    The first was the start of the Falklands War which was almost irrelevant to the US and the second was the Gulf War upon which so much hope is currently, seemingly, being pinned.

    They note that in 1991 the market immediately went up and then just kept on going. This was the precursor to the economic boom of the first half of the 90's followed by the dotcom and technology boom in the second half.

    They also note that the market initialled dropped on nes of the Iraq incursion into Kuwait and did not take off until the US attck began in 1991.

    The presumption is then made that we are currently in a replay of that 'post invasion period'.

    They then go on to note that four to eight months later the reverse is usually the case - that the US market has normally been up and usually very strongly - with only three exceptions.

    The rest of the article notes the profound differences between the world as it was then - and now - political, investment and economic.
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