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This past week saw heightened market volatility as global geopolitical tensions dominated headlines. While the S&P 500 initially looked poised for another positive finish, a sharp sell-off on Friday erased earlier gains. Against this uncertain backdrop, performance across major ETFs and select stocks remained mixed, with certain sectors benefiting from increased global risk.

In the below table we use major ETF's as a proxy for each of the 15 sector groups that we divide the market into. Tracking these over time provides a more defined picture of the US markets than simply tracking major indexes.

Current ValuEngine reports on all covered stocks and ETFs can be viewed at here.

Friday reversed what looked like another good week for the S&P 500. After a four-day net gain of 0.8%, the ubiquitous benchmark index lost 1.2% to finish the week down nearly 0.4%. The major reason given for the sell-off by most pundits was the shockwaves rippling across the world from Israel’s attack on Iran’s nuclear weapons and military hierarchy. Obviously, Iran would retaliate – and did on Saturday. The real concern was how far things would escalate beyond that. Since the market hates uncertainty, the next question is how much longer will the market be skittish about the drumbeats of potential war?

In almost all historical cases, any market declines caused by global unrest have lasted less than six months and most have lasted less than one month. That said, some stocks and ETFs performed well because of the events even while most were getting whacked. Roughly 14% of S&P 500 stocks were gainers. Oracle (ORCL) with a ValuEngine rating of 4 (Buy) topped the S&P benchmark index’s list with a 7.7% gain. Most of the others in the top 10 are related to two sectors that could see revenues increase as a result of global tensions. Several oil and gas companies like Haliburton (HAL), APA Corp. (APA), and Occidental Petroleum (OXY) saw significant gains due to the spike in crude oil futures triggered by escalating conflict in the Middle East. All three stocks are rated 3 (Hold) by our predictive model.

Defense contractors also were beneficiaries of these events. Shares of Lockheed Martin (LMT) rallied 3.5% while RTX Corp, (RTX), formerly Raytheon, rose more than 3%. LMT is rated 3 (Hold) while RTX is rated 4 (Buy). Overall, it is probably not time to reposition your portfolio to overweight these industries. The largest ETF with these stocks, iShares Aerospace and Defense (ITA) is rated 3 (Hold). We’re less keen on Energy ETFs. The largest ETF representing these stocks is Energy Select Sector SPDR (XLE). It is rated 1 (Strong Sell). So, we’d have to see a lot of upward earnings estimate revisions before we could recommend many stocks or ETFs in the Energy Sector. Let’s see what the coming week brings.

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