As anti-American protests spread across the Mideast — sparked by a 14-minute clip on YouTube — financial advisers here in the U.S. say the uprising only confirms existing biases toward domestic investing. The unrest also has cemented the standing of one nation as possibly the only solid bet in the region.
“I'm not real comfortable with much outside the U.S. right now, because if you look around the world, it's pretty clear that the U.S. markets represent the best horse in the glue factory,” said Sam Jones, president of All Season Financial Advisors Inc., which has $110 million under management.
“There's been unrest in the Mideast for a thousand years, and I think that's the way most money managers and advisers look at that situation,” he added. “At this point, it's not something you can react to from an investment standpoint unless it really got messy and became a war play for the U.S., but I'm not sure that's what you want to play right now.”
Theodore Feight, owner of Creative Financial Design, said he has kept his client portfolios away from the Mideast and Africa ever since last year's celebrated Arab Spring, which involved some several governments being violently overthrown.
“We've been avoiding the Mideast and Africa, and we're out of Europe,” he said. “And we've been trying to avoid — as much as possible — the oil companies, because I think they're too high anyway.”
Mr. Jones pointed out that one might normally expect oil- and energy-related stocks to show strong gains during times of extreme unrest in oil-rich regions of the world. By 2 p.m. EST on Monday, however, most of the broad energy-related proxies had experienced sharp declines.
United States Oil Fund LP Ticker:(USO), an exchange-traded fund that reflects the spot price of West Texas intermediate crude oil, was down more than 3%, which compared with a declined of half of 1% by the S&P 500.
The iPath S&P GSCI Crude Oil Index ETN Ticker:(OIL), ProShares Ultra DJ-UBS Crude Oil Ticker:(UCO) and United States 12 Month Oil Ticker:(USL) exchange-traded vehicles were also all down by more than 3% from the start of the day.
“I haven't made any adjustments to client portfolios at this point, but given what has gone on over the past four or five days, that could be an eventuality” said Clinton Struthers, owner of Struthers Financial Services, a $100 million advisory firm.
“You look at all the stuff going on and you have to wonder if we're looking at another world war situation. And if that's the case, you have to think about how to position yourself,” he added.
If the protests ultimately lead to a threat to U.S. oil supply, Mr. Struthers suspects the energy issue will become central to the conversation.”
“If the whole Middle East is deciding to self-destruct, that creates some issues for this country,” he said. “It could shut down the environmentalists that have prevented oil drilling on this continent.”
One possible exception to the general avoidance of Mideast markets is Israel, according to Jamia Jasper, founder and president of Amerisrael Capital Management LLC.
“With the exception of Israel, I would avoid all [Mideast] places, sectors and industries,” she said. “Israel is a unique market in the Middle East because it's a developed market among emerging markets, with a democratic society, [Securities and Exchange Commission]-equivalent regulatory body and audited financials.”