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AMP Capital's Oliver: Investors' Concern About Syria Likely Short-lived

By Michelle Smith   |   Friday, 30 Aug 2013 08:25 AM

Some analysts are expecting jitters in equity markets prompted by the Syrian conflict to be short-lived and there are indications that many investors may already be redirecting their focus.

Though concerns about military action against Syria rattled stock markets around the globe earlier this week, analysts say long-term weakness for U.S. stocks is unlikely.

History shows that even when U.S. military action sparks a sell-off, U.S. equities tend to claw back the losses fairly quick, Shane Oliver, head of investment strategy and chief economist at AMP Capital, told CNBC.

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He explained that while stocks fell before military intervention in Iraq in 1991, 1998 and 2003 and ahead of intervention in Libya in 2011, they got back those losses within two months of the actual events.

"Basically, shares could still fall a bit ahead of any strikes, but once they [strikes] commence, stocks are likely to rally, particularly if it appears likely that any western military action will be limited," Oliver said.

"Providing there is no retaliation by Syria or Iran in some way, which appears unlikely, this should further reinforce any recovery," he added.

A military strike has not occurred and there are already signs of a market rebound.

The White House has confirmed the use of chemical weapons in Syria, but did not commit to take any specific action. And Wednesday, permanent members of the U.N. Security Council failed to reach an agreement for a forceful response.

The Associated Press noted that the U.K. government backed down on a parliamentary vote to authorize British participation in a strike against Syria, at least until U.N. inspectors reveal their findings about the events in Syria.

"As the world decides if and when it wants to deepen its involvement in Syria, investors may shift their attention to U.S. data and the prospect of Fed tapering," Kathy Lien, a managing director at BK Asset Management wrote in a market note.

Michael Every, an analyst at Rabobank International, agreed. As stocks climbed Thursday, he told AP, "with Syria perhaps on the back-burner for a while, ... [we] may see the market switch its attention back to economic data."

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