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Trump fires missiles at Syria. Wars and Markets

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Apr, 10
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Trump fires Syria

Right after President Trump met President Xi Jinping at “his” Mar-a-Lago West Palm Beach resort, Trump ordered the US Navy to fire about 60 missiles at Syrian’s Shayrat airbase destroying some planes, buildings and causing some fatalities in the process.

What were behind the decision for this sudden show of US hard power by the Trump administration during his first 100 days? And why did it happened almost immediately, after the most watched summit between President Trump and his Chinese counterpart amidst much hyped up trade wars and political bickering over South China Sea and North Korea?

The timing of the air strike leaves plenty to be analysed.

We have witnessed the atrocities that the perpetrators had caused in Syria. The haunting images of uncontrollable shaking of human bodies and disturbing images of children dead with foaming mouths call for justice. We pray for peace for the families of the dead and wounded.

Wars and Markets

According to experts, each Tomahawk missile, made by Raytheon Co. likely cost US $1 million. The Trump administration fired US $60 million at a Syrian airbase, not counting the peripheral costs and other expenses incurred. 

Some analysts have estimated that the US had spent US $ 1.7 trillion for the wars in Iraq from 2003 to 2010. Such mind boggling figures render the costs of the air strikes to petty change. However, wars are not cheap and wars are destructive. (me thinks)

Above is the chart for Dow Jones Index. One can see that since Trump won in Nov 2016, Dow Jones went on a Bull run and is currently trading at record levels of 20,600! Much of the euphoria and optimism were attributed to his promises on tax, healthcare, trade, immigration and many other reforms that will boost the American economy. In reality, not many analysts would have expected Trump of waging a war, neither would they have anticipated a Trump administration of firing missiles at anyone as his top priorities and most certainly not within his first 100 days in office. Thus, what happened on 07 April is indeed an outlier, arguably a black swan event.

Hindsight is 20/20.

It is hard to dispute facts, especially when they are historical prices printed on publicly traded exchanges. Although intuitively, one tends to view wars as destructive and negative for the economy, it is rather difficult to find supporting evidence for this intuition. In fact, one can argue that wars are good for the economy, judging from the bull runs during the different periods of conflicts and wars that the US was involved in. The multiple recessions that hit the US economy are arguably not a direct causality of the US’s participation in such wars and conflicts!

Now that Dow Jones is trading at record levels, US dollars trending stronger and the hawkish bias Fed are looking to raise interest rates further – what does this means for us? Some readers have pointed out my “obsession” of leaving open ended questions in my articles, but I am going to disappoint again, I have no answers except questions.

How will the world react to Trump’s unilateral attacks on Syria? Will it spark a war or will it spark a trade war?

What will the markets think? Will they see such conflicts as economy boosting due to pro-spending on defense or perceived negatively as conflicts dampen business environment?

We must watch and decode each Twitter more carefully. Enjoy.

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