A war is different. The markets can look back to the Gulf War a decade ago, and draw some lessons. Ultimately, investors have no more insight into how the war might go than the average Joe in the street. The market has no mechanism for measuring the different options, or for deciding which outcome is the most likely.
In those circumstances, the most rational response is to sit on your hands and do nothing -- and, when the occasion presents itself, sell a bit more of your portfolio. The market's current judgement -- roughly translated as "we don't have a clue what's happening" -- is just about right.
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