ALBAWABA – Amid what could be the worst October for stocks worldwide, investors are pulling out of equities over the intensifying Israeli onslaught on Gaza and fears of the conflict spiralling into a regional war have driven investors away from equities and into safe havens.
The Chicago Board Options Exchange Volatility Index (VIX) rose above 21.2 on Sunday, according to Google’s market summary, as stocks worldwide brace for their worst October in five years.
Fear is mounting over the Israeli onslaught on Gaza spiralling into a full-blown regional war after the United States (US) bolstered its military presence in the Middle East.
Meanwhile, Israeli occupation forces have been targeting Palestinian resistance assets in Gaza and Hamas supporters in Lebanon and Syria.
As uncertainty shrouds the prospects of the future in the region, investors have been turning to safe havens, such as gold and other precious metal to hedge against ambiguity.
A poll by the National Association of Active Investment Managers, reported by Bloomberg, shows money managers rolling back in exposures to bearish levels last seen in October 2022.
In the meantime, equity positioning has fallen below long-term averages for most investor categories, particularly hedge funds and mutual funds, according to Barclays Plc analysis of CFTC data.
Fears mounting over the Israeli onslaught on Gaza paint gloomy picture for stocks worldwide as gold prices rise, indicating a shift in the market towards safe havens - Shutterstock
In terms of indexes, the S&P 500 fell more than 1 percent five different times this month, pushing the index into a correction on Friday.
Likewise, a volatility gauge of projected price swings in the Nasdaq 100 Index is hovering near the highest level since March, as reported by Bloomberg. Even after the tech sector finally caught a break on Friday on solid earnings from Amazon.com Inc. and Intel Corp.
Yet, the Nasdaq 100 closed out the worst two-week drop this year and is poised for its steepest October loss since 2018.
The VIX, also known as Wall Street’s “fear gauge”, has held above 20 for a second consecutive week now, having remained below the threshold for more than 100 days.
On the other hand, this could be a good thing, indicating latent buying power contingent upon sentiments flipping any time soon.
However, none of this would materialize in case of an escalation of the Israeli onslaught on Gaza in the form of a regional war involving the US.
Any direct US involvement will likely force the government to increase war-related spending, resulting in a larger deficit. This, in turn, would drive Treasury yields beyond the 16-year highs they already have hit, according to Reuters.
Naturally, as Treasuries are considered a safe haven investment, higher yields will likely draw more money out of equity markets, suffocating stocks worldwide.
