At The Money: Navigating War, Tariffs and Geopolitics

Summary

Masters in Business – Episode Summary

Title: At The Money: Navigating War, Tariffs and Geopolitics
Host: Barry Ritholtz
Guest: Sam Rowe, Veteran Markets Journalist and CFA
Release Date: June 25, 2025

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Bloomberg Radio’s Barry Ritholtz delves into the intricate landscape of modern investing amidst geopolitical upheavals in the latest episode of At The Money. Joined by esteemed markets journalist and CFA, Sam Rowe, the discussion unpacks the challenges and strategies for investors navigating wars, tariffs, and geopolitical risks.

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1. Introduction to Geopolitical Risks in Investing

Barry Ritholtz opens the conversation by highlighting the turbulent geopolitical climate, marked by conflicts such as U.S. bombings in Iran's nuclear sites, Israeli drone attacks, and ongoing aircraft bombing raids in the Middle East. He sets the stage for a deep dive into how these events, coupled with fluctuating tariffs, create a complex environment for investors.

2. The Resilience of the U.S. Stock Market

Sam Rowe underscores the historical resilience of the U.S. stock market in the face of geopolitical crises. He explains that while conflicts introduce significant volatility, the markets have historically rebounded within a relatively short period.

Sam Rowe [03:54]: "The median stretch from the start of a conflict to the bottom of the S&P 500 is about 15 trading days."

Barry clarifies:

Barry Ritholtz [06:09]: "15 trading days. So essentially three weeks."

Rowe emphasizes that while the average market dip is brief, investors must remain vigilant as each geopolitical event possesses unique characteristics.

3. Balancing Long-Term Investment with Short-Term Volatility

Ritholtz probes the duality of investing during geopolitical tensions—acknowledging the emotional strain while emphasizing prudent capital management. Rowe advises investors to adopt a long-term perspective, focusing on horizons that span beyond immediate market reactions.

Sam Rowe [07:19]: "You have to be mindful of the possibility that things can get worse."

He further reflects on historical data, noting that despite prolonged conflicts like those in the Middle East, the overarching trend in markets remains upward due to fundamental economic drivers.

4. Impact of Geopolitics on Oil Prices and Inflation

The conversation shifts to energy markets, particularly the historical linkage between Middle Eastern tensions and oil prices. Rowe points out a significant shift in the U.S.'s energy consumption patterns over the decades.

Sam Rowe [12:10]: "Energy spending as a percentage of personal consumption expenditures... has declined from about 10% in the late '70s and early '80s to closer to 3-4% today."

This decline is attributed to advancements in energy efficiency across various sectors, including automotive and household appliances. Ritholtz adds:

Barry Ritholtz [13:13]: "We switched to natural gas from oil about 10 years ago. It costs a fraction of what oil costs and it pollutes less."

Despite geopolitical tensions, the reduced dependency on Middle Eastern oil has made oil price shocks less inflationary than in past decades.

5. The Realities of Home Shoring and Automation

Ritholtz raises the topic of home shoring—relocating manufacturing back to the U.S.—and its viability in the current technological landscape. Rowe provides a sober assessment:

Sam Rowe [14:08]: "We're not going to have a ton of home shoring. Instead, manufacturers are likely to move to countries like Vietnam, Mexico, or Indonesia where costs, while higher than China, remain competitive compared to the U.S."

He further elaborates on the transformative impact of AI and automation:

Sam Rowe [15:44]: "AI is affecting not just the assembly line but also office environments, allowing for significant efficiency gains and reducing the need for human labor."

6. Strategies for Balancing Investment Amid Risks

As the discussion progresses, Ritholtz seeks actionable advice for investors facing ongoing geopolitical uncertainties. Rowe advocates for a balanced approach grounded in historical awareness and data-driven decision-making.

Sam Rowe [16:09]: "You’ve got to study the history and look at the data. Remember how bad things were at various points in history."

He shares his personal practice of journaling during crises to maintain perspective and avoid panic-driven decisions:

Sam Rowe [16:09]: "Reading my own memories or real-time accounts reminded me that it always feels like the end of the world, but it passes."

Ritholtz relates this to his own experience during the financial crisis and the COVID-19 pandemic, highlighting the importance of maintaining a long-term investment strategy despite short-term turmoil.

7. Reflection on Past Crises and Market Strength

Rowe reflects on past crises such as the Gulf War and the Deepwater Horizon disaster, illustrating the market's ability to recover and thrive post-crisis.

Sam Rowe [17:55]: "The economy has never been stronger, and the stock market has never been higher."

He draws parallels to the ongoing conflicts in Russia-Ukraine and the Middle East, asserting that while new geopolitical tensions are inevitable, history shows a consistent pattern of market recovery driven by the fundamental desire for economic improvement and stability.

8. Conclusion: Embracing Duality in Geopolitical Disruptions

Barry Ritholtz and Sam Rowe conclude by acknowledging the emotional and human toll of geopolitical conflicts while reaffirming the importance of informed, steady investment strategies.

Barry Ritholtz [20:31]: "We experience these geopolitical disruptions in a form of duality. As human beings, we are aware of the emotional turmoil... and just how psychologically damaging all these horrific events are. And yet, at the same time, we have to be good stewards of our own capital and recognize that this too, shall pass."

Ritholtz signs off, reinforcing the episode's central theme: navigating the volatile interplay of global events with resilience and strategic insight.

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Notable Quotes:

• Sam Rowe [03:54]: "The median stretch from the start of a conflict to the bottom of the S&P 500 is about 15 trading days."

• Sam Rowe [07:19]: "You have to be mindful of the possibility that things can get worse."

• Sam Rowe [12:10]: "Energy spending as a percentage of personal consumption expenditures... has declined from about 10% in the late '70s and early '80s to closer to 3-4% today."

• Sam Rowe [15:44]: "AI is affecting not just the assembly line but also office environments, allowing for significant efficiency gains and reducing the need for human labor."

• Barry Ritholtz [20:31]: "We have to be good stewards of our own capital and recognize that this too, shall pass."

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This episode offers a comprehensive exploration of how geopolitical dynamics influence investment strategies, emphasizing the importance of historical context, data analysis, and a disciplined approach to navigating market uncertainties. Whether you're a long-term investor or actively trading, Ritholtz and Rowe provide valuable insights to help you stay informed and resilient in an ever-changing global landscape.

Transcript

[Barry Ritholtz]

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[Barry Ritholtz]

War Geopolitics Tariffs how is an investor supposed to navigate their way through an environment where the US bombs, Iran's nuclear sites, Israeli drone attacks have taken place in the Middle east, as well as aircraft bombing raids? All of this comes after months of noisy tariff announcements and walking those back Geopolitical Wrangling what are investors supposed to do when a war breaks out? I'm Barry Ritholtz and on today's edition of at the Money, we're going to discuss how to manage your way through war, tariffs and all manner of headline risks. To help us unpack all of this and what it means for your portfolio, let's bring in veteran markets journalist and CFA Sam Rowe. Sam's known for his clear data driven insights into markets and the economy. He is a journalistic veteran who has worked at Forbes, Yahoo, Business Insider, and Axios. His substack ticker was named by the Society of Business Editors and Writers as the Best in business for 2022. So, Sam, let's start with something you wrote recently. Quote, the U.S. stock market has a long history of demonstrating resilience and in the face of major geopolitical risk events. Explain that.

[Sam Rowe]

Yeah, I mean, it's every couple of years or every couple of months, I think you and I, or you and your clients and me and my readers have the same kind of discussion. Some conflict breaks out, volatility comes to the markets. What are we supposed to do? And you know, of course, you know, as a human being, this is very scary. As someone who cares about or has friends and family connected to those events, it's really distressing. And then you put your investor hat on and think about what does history tell us here? Now, obviously every event is going to be slightly different, but history also tells us that the markets seem to eventually look past this, even with what's going on in the Middle east right now. I think for as long as we've been alive, there's been some permutation of a Middle east conflict and it's always been scary. And there's always secondary effects in the financial markets, whether it's with oil prices or volatility and interest rates and currencies and all these sort of things. I think for traders who are trying to weave in and out of this, it's a big deal and you really should be paying close attention to every development here. But as someone who has to get somewhere in terms of retirement and long term savings, or if you're saving for your kid's college fund or something, you have to wonder, what does five years out look like? What does ten years out look like? What does even three years out look like? When you see some of these reviews of various geopolitical events in the past, there are some conflicts that go on for a very long time and may or may not have a longer term impact on the financial market. But for the most part, the market hits tend to be very brief. I think I saw something from Deutsche bank recently that reviewed something like 30 geopolitical events of the last 100 years. From the beginning of the event that triggered the conflict to the bottom of the s and P500, on average, the median stretch is about 15 days.

[Barry Ritholtz]

15 trading days.

[Sam Rowe]

15 trading days.

[Barry Ritholtz]

So essentially three weeks. That's interesting. You said something not too Long ago that I thought was intriguing and I'm wondering if it was geared to investors or traders. Stocks usually look past geopolitical events, but these events shouldn't be ignored. How do you have it both ways?

[Sam Rowe]

Absolutely. I think one of the mistakes that a long term investor can make is to try to pretend like nothing else is happening in the world. Of course this stuff matters and we're going to follow news in our personal lives and all that kind of stuff. Sometimes we want to just ignore all this stuff, especially if we have 15, 20, 30 years until we actually have to begin selling these stocks. I don't know if that's totally healthy because maybe the study says 15 days till the market bottoms, but the study might also have a range of outcomes where it might take three years till the market bottoms.

[Barry Ritholtz]

15 days is the average, but that doesn't necessarily mean each time it's going to be 15 days.

[Sam Rowe]

Exactly. I think you definitely want to be mindful of the possibility that things can get worse. Even with what's happening right now, the markets seem to have bounced back pretty quickly. All time highs, all time highs. We're within reach of all time highs. But that doesn't mean there isn't going to be another flare up tomorrow or next week or in a couple of months. I think you have to be mindful of the fact that this stuff is going on in the world. And then you go back to the history and say, hey, the odds actually say people want de escalation. People would rather not have violence out there. And that involves all parties. And so as long as there are more people who would rather not have violence than want violence, I think there's some gravity toward de escalation and a pullback and violent activity.

[Barry Ritholtz]

So let's delve into the history of, well, we'll deal with tariffs in a little bit. Let's talk about war. There's a history of the last century of small wars, large wars, world wars. We have World War I and World War II. We have the Korean War, Vietnam, Iraq in 1991, and then Afghanistan and Iraq in oh three. And today it's Iran, which seems to have been building, I don't know, since 1979, when the hostages were taken following the Iranian revolution. How should investors, not in their personal or family life, but as stewards of capital, contextualize the dangers of war and the dangers of being frightened out of the market because of war?

[Sam Rowe]

You know, I was just having a conversation about this the other day about this whole matter of you turn on the TV and someone will tell you, well, uncertainty is elevated today. Uncertainty. It doesn't make sense that the market's so high because of all this uncertainty that's out there. Well, uncertainty just defines the nature of investing in the stock market. If there was no uncertainty, you wouldn't get a great return.

[Barry Ritholtz]

Right. If you want certain returns, you can get four point something on the ten year Treasury.

[Sam Rowe]

Right? Exactly. But I was just thinking about, you know, the history of conflicts, especially in the Middle East. And I remember when the Gulf war started in 1990 and I was eight years old, I was looking at the data and apparently that was a pretty rough time both in the oil markets and in the financial markets. And it was a tough time to be an investor going through all this volatility because maybe this is it, maybe this is the end of all that. But then, you know, it's not long after that you realize that's actually an incredible time to start putting money into Sam Rose 529. I wish my parents put money into a 529 plan at that time, but they didn't. But again, you just look backwards and if there's any, if there's a more powerful force than geopolitical tensions, it's going to be everyone's desire to want things to be better. And even from like a business perspective, you know, they want better technologies, they want things to be cheaper, they want things to be faster. And that force that's driving earnings and profits and productivity in the economy and employment and quality of life, standards of living and all this stuff will continue to be the dominant force in the markets. So I think that's what people miss. Like if you were to be able to, if you could put all that into like a pie chart, sure you have these flare ups in geopolitical events, but the dominant forces remain.

[Barry Ritholtz]

That makes a lot of sense. You mentioned oil earlier in the 1990s and especially in the 1970s, any time we saw Mideast tension, that always translated into higher oil prices which then pushed into CPI inflation driving it higher. Are we in the same set of circumstances today? Ever since the new fracking technologies in the 2000s and the United States just cranking out oil for the past, I don't know, 10, 12 years at, at all time record rates. Does the US lesser dependence on Middle Eastern oil make it more or less likely that Middle east flare ups are not going to be as inflationary as they once were?

[Sam Rowe]

I think it's going to be not as inflationary as they once were. One of my favorite metrics that's out there is energy consumption spending as a percentage of personal consumption expenditures. And that was somewhere that was floating around at about 10%. Energy spending as a percentage of personal consumption expenditures.

[Barry Ritholtz]

Household budgets.

[Sam Rowe]

Yeah, household budgets, yeah, about 10% in the late 70s, early 80s, and that's steadily been declining and now it's closer to somewhere between 3 and 4%.

[Barry Ritholtz]

That's amazing.

[Sam Rowe]

Yeah. So energy, the direct spending on energy has shrunk significantly and then past that. The car you drive today is far more fuel efficient than the car you drove 20 years ago. So fuel economy has improved for one of the biggest purchases of energy, which is gasoline for cars, to say nothing.

[Barry Ritholtz]

About Hybrids and EVs.

[Sam Rowe]

Hybrids, EVs. Your refrigerator is more energy efficient. The AC is more energy efficient. The.

[Barry Ritholtz]

We switched to natural gas from oil, I don't know, 10 years ago. It costs a fraction of what oil costs and it pollutes less. And as much as people say natural gas is a problem, it's certainly much better than coal and better than oil.

[Sam Rowe]

Right, right, right. Having said that, it can certainly have a psychological effect on consumers especially. We can spend all day talking about how I get 25 miles per gallon now, as opposed to 15 when I first got my driver's license. But when you see gas Prices go from $2.50 to $3.25 in a very short period of time, that affects you because that's immediately coming out of whatever your Starbucks budget might be.

[Barry Ritholtz]

Really interesting. We've seen an argument pushing for home shoring will bring these factories back to the US we'll create all these new jobs. Is that realistic? In the modern age of advanced automation, new technologies, artificial intelligence and robotics, are we really going to fill factories with workers or are we going to be filling new US based factories with a whole bunch of robots?

[Sam Rowe]

Yeah, I think there's several ways to answer that question. And in every way it's going to be, no, we're not going to have a ton of home shoring. We might have some at the margin. Everything happens at the margins. Some people who are saving 0.001 percentage point manufacturing in China might figure out a way to move to the US but for the most part, it's not going to be that much cheaper to move your manufacturing to the US Just because it was so expensive in China. You're going to move to Vietnam, you're going to move to Mexico, you're going to move to Indonesia and all these other places where it might be more expensive than China, for instance, but it's still going to be cheaper than the US So I think that's one of the unintended consequences of that. But as far as what you're saying about AI and machinery and robotics and all this stuff. Yeah, absolutely, that's already happening. And so it's a question that I don't know if you can fight that. Right. Unless you decide. Unless there's a policy that decides that there's a limitation on how many robots you can have in your factories. Not even talking about manufacturing anymore or goods production. We're also talking about services, everyone in the service. It's like AI has gotten to the point where it's not just affecting the assembly line, it's affecting people who go into an office and go to meetings and strategize for their marketing departments or if they work in banking. Suddenly you can cut a couple steps out of putting numbers into an Excel spreadsheet.

[Barry Ritholtz]

Really interesting. So last question. How can investors balance staying invested against all of these geopolitical risks, war risks, trade war risks, tariffs, and just unexpected escalations? How do they balance the need to stay invested through this against the potential downside risks of all these headline?

[Sam Rowe]

You gotta study the history and you gotta look at the data and you got to remember how bad things were at various points in history. Me personally, I like to keep a journal when bad things happen. I wish I had done this more actively during the financial crisis, but I didn't. I certainly did during COVID And something that, I mean, you know, you can sort of get this by proxy through reading a really deep account of various historical events. But reading my own memories or my own real time accounts of something like Covid reminded me that it always feels like the end of the world and it lasts so much longer than you expected. I have 50 pages here where it's just like day after day after day, we live in a new era where we're never going to be in the same office again, we're never going to meet anybody ever again. And all these kinds of things. It's something I like to do every once in a while, especially when things are calm. Right? It's one thing to be in the middle of a crisis and then study the history of crises and it's like, no, no, no, no, no. This time it's different. But when things are calm, that's probably actually the best time to go back and remember things like, well, here's another. I'm sorry to sort of keep going.

[Barry Ritholtz]

No, I'm interested.

[Sam Rowe]

Digress a little bit. I got A notification on Facebook saying that. I think it was exactly 15 years ago I submitted an idea for fixing the Deepwater Horizon disaster. I don't know if people remember this.

[Barry Ritholtz]

But that was bp, Amoco, and Ken Feinberg oversaw the. Yeah, I recall that.

[Sam Rowe]

Yeah, yeah. Gulf of Mexico. An oil well blows up, and it's spewing oil into the Gulf of Mexico. Do you remember how long it was spewing oil into the Gulf?

[Barry Ritholtz]

60 days. Some crazy.

[Sam Rowe]

Three months.

[Barry Ritholtz]

Yeah. 90 days. Wow.

[Sam Rowe]

Three months that they were eventually able to put a cap in it. And it took. I think it took another two or three months to officially say this thing was sealed.

[Barry Ritholtz]

Right.

[Sam Rowe]

It's insane how long this went on for. But, you know, everyone's memory is going to be, oh, well, it was something in the past. It's like, I remember it being three months. Oh, I remember being. It couldn't have lasted longer than two weeks.

[Barry Ritholtz]

But when you're in the moment in the. Humans live in the here and now, and when it's happening, especially day after day after day. It's funny you mentioned journaling during these things. I was essentially ended up writing Bailout Nation in real time in public on the blog.

[Sam Rowe]

Yeah, yeah, yeah.

[Barry Ritholtz]

I recall having a conversation with my trading desk back then who were just, like, exhausted from the volatility. Everybody was making money, but it was exhausting. And there's this fantastic line in Apocalypse Now. Do you remember the Charlie don't surf scene where Duval goes up to Martin Sheen and he says with this wistfulness, you know, son, someday this war is gonna end. Like, disappointed. And when you're in the middle of it, it feels like it's never gonna end. The financial crisis was never gonna end. Deepwater Horizon's not gonna end. The tariffs war are not gonna end. But we always seem to come out the other side.

[Sam Rowe]

Yeah. And again, we just came out of COVID like we were.

[Barry Ritholtz]

Which really felt like it was never gonna end.

[Sam Rowe]

We were literally living a science fiction movie. Like, it's. There's no. There's no amount of money you can throw at this problem. Like, you just have to pray that the science is gonna be good enough, that we figure out how to come up with a vaccine and contain this thing. But the amount. The scale of death was unbelievable.

[Barry Ritholtz]

Yeah. Millions. Millions of people. Millions and tens of millions around the world. Yeah.

[Sam Rowe]

And yet the economy has never been stronger, and the stock market has never been higher. So I think, listen, it's not to sort of necessarily downplay what's going on in terms of. And it's not just Iran. We still have a war going on between Russia and Ukraine. Let's not forget about that. Right.

[Barry Ritholtz]

So it's the Middle east, it's Russia and Ukraine. There are other hotspots going on in Africa as well.

[Sam Rowe]

Yep. And there's going to be something else that's going to flare up that's inevitable. But you know, again, I think not to downplay any of it, but to offer some perspective, it might help to go back and just sort of remember those times when things were really tough.

[Barry Ritholtz]

So to wrap up, we experience these geopolitical disruptions in a form of duality. As human beings, we are aware of the emotional turmoil of the toll in human suffering and just how psychologically damaging all these horrific events are. And yet, at the same time, we have to be good stewards of our own capital and recognize that this too, shall pass. I'm Barry Ritholtz and this is Bloomberg's at the Money.

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A warming planet, complex geopolitics and fierce competition means business operations are under more scrutiny than ever before. Returning to Singapore this July, the Bloomberg Sustainable Business Summit is uniting leaders and investors to explore how sustainability efforts can bolster resilience and mitigate risk. Learn more at BloombergLive.com SBS Singapore that's BloombergLive.com SBS Singapore this is an iHeart podcast.