Outside world events and news always have a great impact on the stock market. Especially, if a war breaks out or a political problem arises, the stock market will dive quickly. “Buy on the sound of cannons, sell on the sound of trumpets” is a very old saying which relates to the stock market in general. Plus, it also shows the behavior of stock market during the uncertainty period. This saying was coined in 1810 and is attributed to London financier Nathan Rothschild. This saying suggests that the beginning of war or continuance of the war is a good time to invest and the end of the war is the good time to sell.
This phrase has been used in different manners over time. One of the particular ones which are in trend is “buy on bad news and sell on good news.” But, the question is, how war and political problems affect the stock market.
You also must be wondering, “how war can affect the stock market, isn’t it?”
The Sound of Cannons
Well, no doubt share market and war are two totally different things but when a war happens, there is a considerable amount of uncertainty and panic in the markets which leads to selling. The circumstances down the prices of stock and make a suitable time to buy even during the wartime. The only companies who do best during war times are companies who deal in weapons selling and sell to the military.
The Sound of Trumpets
When the war ends, trumpets playing show the sign of victory. And when the war ends, people and companies who sold out their stocks during wartime start buying once again and people who invested during wartime get the chance to sell stocks at high prices. It is definitely the time for people who purchased-at-low-prices stocks to higher valuations.
Final Thoughts: -
As we can see, this phrase tells “market often overacts to both good and bad news” which also provide investment opportunities if you watch carefully. Which lead us to another saying which is “Don’t fight the trend”. So, make sure to follow the trends of the stock market.
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