How should investors (and the sell-side analysts which serve them) deal with the threat of a nuclear war?
On the one hand, a civilization-ending event would clearly be of concern for investors. For people who claim to be in the business of dealing in risk, it feels like something that they might want to at least talk about. The price action overnight, when Russia’s shelling of a nuclear plant in Ukraine sparked a sharp risk-off moment in markets, might have at least focused more minds on the possibility if money managers weren’t already thinking about it.
But on the other hand, attempting to price in the literal worst-case scenario seems of limited use: It’s unlikely that anyone still around will be thinking much about their portfolios. From that perspective, it might make sense to buy the dip on rising worries over a nuclear incident. If the worst doesn’t materialize, stocks will recover. If the worst does happen, they won’t but you’ll probably be beyond caring about them at that point.
All of which is to say, here’s Peter Berezin, chief global strategist at BCA Research Inc., presenting the buy case for stocks on the risk of nuclear war.
As he notes, there might not be much point to try to price existential risk for markets:
And here’s more on the ‘freak out moment/buying opportunity’ that could be yet to come: