Years 2020 and 2021 were the years of Healthcare and Technology when it comes to major trend investments.
Billions of dollars were invested in those industries as a result of the pandemic and the lockdowns that occurred. Pharmaceutical companies (Figure 1) had one of the biggest shares of that pie. The main reason behind that is the fact that the world discovered that all the modern medical equipment and medical preparations were not enough to handle one virus outbreak.
Figure 1: TradingView Pfizer Stock Price
This proved that investments are driven by emotions mostly, and in specific fear.
However, the actual driver is the behavior of the investors, so in order to try to forecast potential trends, we need to try to analyze the behavior and emotions of the investor worldwide.
Having that said, let’s take a look at what is happening in the world currently. We all are aware of the current geopolitical turbulence and the unfortunate war that is happening between Russia and Ukraine.
After that, we directly witnessed (Figure 2) big investments targeting the weaponry industry and specifically by the U.S., European countries, Russia, and China.
The United States has the biggest expenditure of USD 778Bio, followed by China (USD 252Bio), India (USD72.9Bio), Russia (USD61.7Bio), and the United Kingdom (USD59.2Bio).
Figure 2: Source, Stockholm International Peace Research Institute Military Expenditure Database
From one side we have the expenditure, however, from the other side, we have the investments.
Lockheed Martin Corp. being (Figure 3) the biggest weapon manufacturing company in the world, witnessed approximately a 50% increase in its stock price the moment president Putin announced the potential movement.
Figure 3, Source TradingView Lockheed Martin Corp.
An interesting yet obvious correlation is between the major weapon manufacturing companies and most metals and in specific steel, since it is one of the mostly used material in this industry.
Figure 4 Source, Steel compared to Lockheed Martin Corp.
We are witnessing a strong positive correlation occurring between Lockheed Martin Corp. stock price and Steel prices that in multiple events reached levels higher than 90%.
However, this increase in steel prices was not just driven by this industry in specific, since inflation is also triggering most of the commodities prices. Not even mentioning the increases in Oil prices that are the current main driver for inflation worldwide.
Everything is betting against inflation and minimal things are supporting the normalization. How long will this phase be until inflation starts diverting back to its healthy 2% levels.
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