Stocks initially sell off on nasty geopolitical news. But emotional overreactions are a mistake.
What stocks do after a geopolitical event doesn’t always tell you where they’ll be once the dust settles.
For instance, the S&P 500 has averaged 1.4% and 1.1% drops, respectively, a week and a month after geopolitical events. After Iran bombed Israel on April 13, the following week the index was down 3.1%.
However, the S&P 500 gains 1.3% three months after geopolitical events, on average. The index rises 5.8% and 12.1% gains after six and 12 months, respectively, both of which are way above historical gains:
Since 1940, stocks have delivered above-average returns a year after major geopolitical events 82.1% of the time:
A Sector Seeing Heavy Big Money Buying
The state of the world is changing sector leadership. For example, a sector seeing heavy Big Money buying amidst the volatility is energy.
The formerly out-of-favor sector has been rising high recently. Through April 30, the Energy Select Sector SPDR Fund (XLE) is up 11.6% (versus 5.6% for the S&P 500), per FactSet:
One energy company standing out is Diamondback Energy, Inc. (FANG). It’s a Texas-based independent energy company focused on natural gas reserves and onshore oil.
FANG is up 30% in 2024 and has a yearslong track record of strong sales and earnings growth:
- 3-year sales growth rate (+56.9%)
- 3-year earnings growth rate (+34.8%)
Source: FactSet
Big Money accumulation is driving FANG upward. Each green bar signals unusual inflows:
FANG has been a top-rated stock at MAPsignals, showing unusual buy pressure and growing fundamentals. We have a ranking process that showcases stocks like this every week.
It’s made the rare Top 20 report numerous times since 2012. The blue bars below shows when FANG was a top pick… Big Money buying sent it soaring:
A Buying Opportunity Ahead of a Big Rebound
Geopolitical tensions mean we should expect short-term volatility. But don’t panic. This is likely a buying opportunity ahead of a big rebound.
It’s a safe bet new sector leaders like energy will play a bigger role in driving the market higher. Follow the Big Money flows with MAPsignals to learn more.
This article was originally posted on FX Empire
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
