Egypt and What it Means for Stocks
As everyone has probably heard by now, Egypt’s in turmoil. How does that affect our stock market? Well, more than ever, our stock market has been affected by headline news. People respond to the media and when the media hypes things up, the market reacts. Last year, it was all the hype around the collapse of the European economy — Greece, Portugal, and the rest of the European nations. Today, it’s Egypt and the collapse of the middle east.
There’s probably going to be a regime change there and a lot of political uncertainty that goes with it. There’s nothing the market likes less than uncertainty and the past week has not been kind to stocks in general. However, there is a couple of silver linings in regards to events happening in Egypt.
The first bit of good news is that things will eventually stabilize in Egypt. When that happens, the stock market should respond positively. The second bit of good news is that the US has very little economic exposure to Egypt. Our banks, exports and economy in general are not really going to be impacted. The only area where we might see some impact is oil prices — but even that risk may be somewhat overblown. So as scary as some of the headlines appear, it’s not really going to affect our economy that much.
When the media stops printing scary headlines about the revolt in Egypt, people will jump back into stocks. For the time being, think of it as an opportunity to pick up some great stocks at discounted prices.
As Warren Buffet once said: “Be Fearful When Others Are Greedy And Greedy When Others Are Fearful.” I would use the crisis in Egypt as an opportunity to exercise Buffet’s mantra.
