What Is the Doomsday Clock? And What Does It Mean for Investors?

  • The ominous-sounding Doomsday Clock moved forward to “90 seconds to midnight.”
  • As a broad sentiment aggregator, it’s an important tool for global citizens.
  • However, investors should exercise extreme caution regarding its interpretative value.
Doomsday Clock - What Is the Doomsday Clock? And What Does It Mean for Investors?

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As if the coronavirus pandemic and the subsequent new normal weren’t enough challenges for investors to overcome, the so-called Doomsday Clock moved forward to “90 seconds to midnight.” According to the Washington Post, it’s the closest the timepiece has been to the hour of reckoning. Still, should investors be worried about the ominous indicator?

Per USA Today, the Bulletin of the Atomic Scientists regularly publishes updates for the Doomsday Clock, reflecting the distance experts believe humanity stands on the brink of destruction. The history of the ominous timekeeper goes back to 1945 when scientists who worked on the Manhattan Project — which produced the world’s first atomic bomb — began publishing reports on the dangers of nuclear warfare.

During the midst of the Cold War, such fears arguably ran rampant across international communities. However, the Doomsday Clock does not abide exclusively in the domain of nuclear apocalypse. As USA Today noted, “[i]n recent years, the threat of human-caused disasters such as climate change has also been factored into the clock’s setting.”

Why Did the Doomsday Clock Tick Forward?

Likely to no one’s surprise, the scientists overseeing the Doomsday Clock largely target Russia’s invasion of Ukraine as the culprit. In particular, Kremlin officials alluded to nuclear threats. “It never occurs to any of the lowlifes to draw an elementary conclusion from this: The defeat of a nuclear power in a conventional war can trigger a nuclear war,” former Russian President Dmitry Medvedev stated recently on Telegram.

Further, per the Washington Post, the conflict in Ukraine sparks other consequences, such as the “…continued dependence on fossil fuels in Europe.” And for the first time, the Doomsday Clock overseers released their update in both Russian and Ukrainian. Rachel Bronson, CEO of the Bulletin of the Atomic Scientists, hoped that the move will command “the attention it deserves.”

Impact for Investors

Because the Doomsday Clock ebbs and flows depending largely on geopolitical stability, theoretically, investors may be able to glean useful information to guide their trading. Unfortunately, the hard data suggests otherwise.

As research published by Steve LeCompte for CXO Advisory Group demonstrates, the Doomsday Clock indicates “…no power of proximity to doom to predict U.S. stock market behavior.” Juxtaposing the statistic minutes to midnight versus the annual S&P 500 index return (on a logarithmic scale) yielded “…practically no relationship between proximity to doom and annual U.S. stock index return.”

To be fair, the analysis may require the minutes to midnight stat to also be assessed on a logarithmic scale. For instance, if a society had two minutes before the Doomsday Clock hit midnight and lost one minute (50% loss), the impact would be far greater than a society that had 20 minutes till touchdown losing the same one minute (5% loss).

Still, even with the above consideration, the S&P 500’s trajectory appears independent of the fluctuations of the Doomsday Clock. Therefore, investors should be cautious about its interpretative value.

Why It Matters

Despite a lack of true objectivity regarding the Doomsday Clock, it does serve as a useful warning. Specifically, investors should not take relative social stability for granted. As the Covid-19 crisis demonstrated, anything can happen in the globally connected ecosystem.

Nevertheless, it’s also important to keep the Doomsday Clock in perspective. In 1962, the world dodged a bullet as cooler heads eventually prevailed during the Cuban Missile Crisis. Still, the ominous timepiece rolled back the clock significantly away from doomsday between 1960 and 1963, even though the threat of nuclear annihilation never truly faded.

Ultimately, then, investors should approach this or any other single indicator with objective prudence.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2023/01/what-is-the-doomsday-clock-and-what-does-it-mean-for-investors/.

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