The closure of the Strait of Hormuz and the Iranian attacks on neighboring countries’ energy infrastructure have caused investors’ fear to spike. But it gives you an opportunity to add to your long-term equity positions. One I like is Howmet Aerospace Inc. (HWM), remarks Jim Woods, editor of Forecasts & Strategies.
Where are we right now in this precarious situation? First, I think it is crucial to keep in mind that it isn’t the war itself that is making stocks fall here. Rather, it’s all about the global disruption in oil transport. I think that if this global oil disruption stops, then even if the war continues, stocks will likely rebound.
Howmet Aerospace Inc. (HWM)
Yes, the longer the Strait of Hormuz stays closed and the longer Iran attacks neighboring infrastructure, the more of a weight this will put on stocks. But the opportunity in this chaos, as I see it, is that for stocks to fall substantially, we would have to see a confluence of negative events.
Then there is the continuation of solid economic data, which has been the buttress that’s been doing the heavy lifting and holding this market up for several years. Here, economic growth is still stable, yet admittedly trending lower.
Yes, we could see a 5%-10% pullback off the January high in the S&P 500 Index (^SPX). But I think that would prove to be a favorable entry point. Certainly our defense and oil sector holdings like HWM are logical choices, as they stand to benefit from the current geopolitical climate.
Recommended Action: Buy HWM.
