{"text":[[{"start":6.5,"text":"The writer is president and chief investment strategist at Yardeni Research"}],[{"start":11.3,"text":"A peace dividend often occurs after wars as belligerents reduce their military spending. That frees up funds for more productive purposes."}],[{"start":19.65,"text":"With the US and Iran scheduled to meet on Friday in Geneva to sign a memorandum of understanding that should end their war and open the Strait of Hormuz, investors should anticipate a different outcome."}],[{"start":31.15,"text":"The conflict is likely to be followed by more, not less, worldwide defence spending. Geopolitical tensions remain very high. The war in the Middle East could flare up again at any time. Countries in the region will spend more on both offensive and defensive military capabilities. China continues to threaten Taiwan. "}],[{"start":51.3,"text":"European nations are also ramping up their military spending to support Ukraine in its war with Russia and to deter further aggression by Moscow in Europe. The Trump administration is aiming to increase US defence spending from around $1.0tn this year to $1.5tn next year. The global arms race is accelerating as new technologies render current armaments obsolete."}],[{"start":74.69999999999999,"text":"Nevertheless, the prospect of an end to the war in the Middle East is already providing a significant peace dividend, namely, lower oil and gas prices. The opening of the Strait of Hormuz will also relieve supply disruptions for other commodities, including helium and fertilisers."}],[{"start":91.29999999999998,"text":"The spike in energy prices during March through May was equivalent to a tax increase on the global economy. It hit developed countries that import oil and gas, including Europe and Japan, as well as several emerging economies, such as India. Oil exporters in the Gulf didn’t benefit because the Strait was blocked. Producers of oil and gas in the US benefited from higher prices, but US consumers were hard hit, especially at the gas pumps."}],[{"start":118.44999999999999,"text":"According to the US Energy Information Administration, global oil consumption before the war was running around 105mn barrels a day. At the time, the price of a barrel of Brent crude oil was approximately $65. That’s roughly $7bn per day or $2.5tn per year in oil consumption. The price rose about 50 per cent because of the war, increasing the “oil tax” on global consumers by $1.3tn at an annual rate. In the US, consumer outlays on gasoline rose from roughly $3,000 to $4,000 (at an annual rate) per household, or about $100bn in aggregate (also at an annual rate)."}],[{"start":156.89999999999998,"text":"Of course, the annual rates aren’t relevant if oil prices continue to fall. In this case, they weren’t up long enough to really act as a tax. So their decline isn’t much of a peace dividend either."}],[{"start":168.39999999999998,"text":"Then again, lower oil prices mean the recent global rise in inflation won’t last long. That prospect is already bringing down bond yields from their recent highs this year. Central banks are less likely to raise their official interest rates if inflation proves to be much more transitory than the previous bout from 2021 to 2023. Global supply chains were much more disrupted back then by the pandemic’s repercussions than they are now by the latest Gulf war. In the US, the labour market was much tighter than it is now, so the risk of another wage-price spiral similar to what happened in 2021 to 2023 is greatly diminished."}],[{"start":206.39999999999998,"text":"Perhaps, the biggest peace dividend of them all currently is the prospect of lower oil prices fuelling the global bull market in stocks. Investors have learned that the global economy is remarkably resilient. Since the start of the 2020s, it has been stress-tested by the pandemic, very serious disruptions in global supply chains, surges in inflation and consequent increases in central bank interest rates and bond yields, Trump’s tariffs and the war in the Middle East."}],[{"start":235.84999999999997,"text":"Yet the global economy has continued to grow, and most stock markets worldwide are near or at record highs in what has become the Roaring 2020s. That’s creating a significant positive wealth effect on consumer spending in the US and many other countries."}],[{"start":252.49999999999997,"text":"Of course, the AI capital spending boom has boosted global economic growth, and AI-related stocks have led the global bull market. The extent of the latter has raised concerns of a global bear market if AI turns out to be a bubble, as happened with the US technology stocks in the late 1990s. "}],[{"start":270.4,"text":"But the difference this time is that the global economy’s resilience is showing up in corporate earnings. The peace dividend from an end to the Iran war may be that investors will gain greater confidence in the resilience of the global economy and corporate earnings, fuelling a bull market that may continue to stampede through the end of the decade."}],[{"start":297.7,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781595892_2859.mp3"}