Good for stocks? Why Tom Lee says the attack on Israel may help equities

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Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

It may not seem obvious why an attack on Israel that has killed hundreds, already led to retaliatory strikes, as well as possible regional war, would be good for stocks.

And, on day one, it doesn’t appear it will be, with futures on the stock-market contracts ES00, -0.56% NQ00, -0.67% pointing to a weaker start.He said interest rates should decline sharply on a “risk off” environment where investors are reluctant to buy riskier assets. “The rally in bonds could break the ‘short the bond market’ fervor that has gripped the rates market for the past month, post-Sept FOMC. And as such, we believe a substantial decline in interest rates could happen with the 10-yr backing off from the high 4.8%-ish ranges seen lately,” Lee said in a note to clients.“It feels awkward to write about equity market impacts from the Israel-Gaza war. War is a tragedy and resulting in heart-breaking loss.

The U.S. bond market was closed Monday in observance of Columbus Day, though Treasury futures TY00, +0.72% traded higher.

 

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