American Foreign Policy and its Impact on the Stock Market

A year-end rally helped the stock market post a gain for the second year in a row. How it will perform in 2005 will be as much a function of worldwide events as of the economy.

The world did not fare well last year. Terrorist and the Iraq War dominated the news in 2004. Bush was re-elected. The year ended with a massive jolt from nature which caused mammoth suffering and devastation.

Will 2005 be a year when American foreign policy and disaster relief efforts impact the domestic stock market? Prominent American companies may already be the targets of world-wide boycotts. According to a Global Market Insite* study released December 27th, twenty percent of respondents in Europe and Canada say they consciously avoided buying US products as a protest against US foreign policy, particularly the "war on terror." "Nearly two thirds of European and Canadian consumers said that they believe US foreign policy is guided primarily by self-interest and empire-building, while only 17 percent believed that the defense of freedom and democracy is the guiding principle."**

America's image as a humanitarian leader was further tarnished by the delayed American response to the earthquake/tsunami disaster. It took three days for the leader of the free world to personally acknowledge one of the largest natural disasters in history. $15 million was originally committed, followed by an additional $20 million. This was one of the lowest totals among wealthy nations. Spain, by this time, had pledged $68 million. Only after mounting criticism did this amount expand dramatically.

How much is $35 million relative to the daily cost of Bush' war in Iraq? 7 HOURS. That's figure is based on Secretary of Defense Rumsfeld's estimate before Congress that the war cost about $3.9 BILLION per month.***

Large companies that are strongly identified with the United States will suffer most if foreign hostility toward America and Americans continues. This may not be good for the domestic stock market, and it's a further reason to develop a well-diversified portfolio that includes foreign investments.

May the earth and its people have a more peaceful 2005.


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