I’m not talking about actual nuclear war where financial instruments wouldn’t matter, but more about how you can hedge during a geopolitical situation where nuclear war might seem likely.
I’m thinking the Cuba missile crisis could be the closest historical example. I asked a research tool and it suggested gold, US treasury bonds, or inverse ETFs. Is there a smarter way to handle this situation?
Look at the market from around 1947 to 1991 if you’re seeking a historical example. The Cold War had a constant threat of nuclear war and global destruction.
@Ash
The SP500 didn’t seem to care much. Visual capitalist has a chart showing the size of different sectors. There weren’t obvious changes, maybe just a rise in materials and energy sectors around that time.
Reagan said: @Ember
It’s funny how people misinterpreted my question even though I tried to clarify with the asterisks around ‘perceived’ and the first sentence.
I liked the effort! It made the situation even funnier.
If nuclear war happens, we’re all in trouble, but if people are just talking about it, I think money would flow into defense contractors like General Dynamics, Northrop Grumman, RTX, and the like.
In times of global crisis, there’s often a ‘flight to quality,’ meaning people go to assets with perceived value and stability. Historically, this meant assets from places like Switzerland and the US, such as sovereign bonds, Swiss Francs, and US Dollars, along with precious metals. Look at what happened during Desert Storm.
Many wealthy people have already protected themselves with real estate in the US, London, Canada, and other countries.
As for today, who knows? Maybe Bitcoin or something random. The question is, when are we not dealing with geopolitical issues or political instability?
How can anyone really give you an answer when no one’s been through a nuclear exchange between countries?
You might be better off hedging against floods, hurricanes, pandemics, and civil disturbances. If you want to hedge against conventional war, just look at recent US market history—it’s been up and down through the years of constant wars over the past few decades.