Investors are focused on inflation, not Gaza

Grim news from Gaza may be dominating the headlines, but it’s not bothering financial markets. Stocks soared last week because investors were more interested in positive US inflation data and growing expectations regarding 2024 rate cuts.

Fears regarding a more volatile regional conflict, potentially involving Iran-backed Hizbullah, have dissipated. Thus, the S&P 500 is now well above where it was on October 7th, when the crisis erupted. November has seen the Vix, Wall Street’s fear index, mark its lengthiest decline in over eight years.

This nonchalance might surprise occasional market-watchers spooked by warnings regarding the darkening geopolitical outlook from the likes of JPMorgan chief Jamie Dimon. However, Dimon also said markets would be “fine”, adding: “Markets can deal with stuff. Markets go up and down. Markets fluctuate”.

That’s usually the case with market responses to geopolitical crises. The latest appears no different.