Keep the powder dry, wait and watch US response, say analysts

Le January 8th, 2020
January 8, 2020
US-Iran tension to lead to bumpy markets, but not bearish trend: Peter Cardillo
January 8, 2020

Keep the powder dry, wait and watch US response, say analysts

US President Donald Trump’ tweet suggesting ‘all is well’ post Iran’s attack on two airbases of US forces in Iraq might have eased market worries to some extent, but analysts said it is naive to expect that the US would not retaliate.

They, however, said any major selloff in the coming days will be an opportunity to buy quality stocks.

Early Wednesday (Indian time), Trump tweeted that the assessment of casualties and damages is taking place, adding that all is well so far. He boasted of the US being the most powerful and well-equipped military anywhere in the world, by far. He also said he would be making a statement tomorrow morning (US time) i.e. post market hours in India.

Iran said it does not seek an escalation or war, but analysts see some retaliation by the US.

“It will be naive to assume that the US will not react despite Trump tweeting all is well,” Sandip Sabharwal of tweeted. “Keep the powder dry. Better entry opportunities ahead,” he said.
Arvind Sanger of Geosphere Capital said he is not sure whether it was a blunder or a well-thought-out decision by the US to escalate the situation with Iran and that it is unpredictable where this will go.

“I do not know what will happen with Iraq, which is caught between the two parties. Remember, Iran exports very little oil because of sanctions, but Iraq is the second largest exporter of crude oil in Opec after Saudi Arabia. If their oil production is somehow impacted because of a number of factors that could go wrong, there will be a problem,” he said.

Peter Cardillo, Spartan Capital Securities, said he was a bit surprised, as he expected Iran to wait a bit longer before striking back.

“But they did act and markets have responded in a negative way. We have safe haven investments going through the roof. Gold is trading at over $1,600 and crude prices are up over 4 per cent. We will continue to have a bumpy ride in stocks. I doubt if Iran is going to close the Strait of Hormuz, which would virtually stop oil flow, and that would be very damaging not only to the US. We will have negativity, we will have ups and downs days; it is going to unravel the bullish sentiment driving the the market until now,” Cardillo said.

Deven R Choksey, MD, KR Choksey Investment Managers, said any fall in the market would be a good news for investments in quality stocks, when they come down. “Keep an eye on the quality stocks, when they get corrected. Probably, I would like to look at some of the financials,” he told ET NOW.