We all pray for an end to the brutal Israel-Hamas war. However, it always annoys me that whenever military conflict breaks out, the media’s coverage is breathless and lurid, as if the violence were a form of entertainment.

You’ve noticed that your television screen is providing wall-to-wall coverage of death and destruction. Speeding tanks; exploding bombs; screeching combat jets. I call it “war porn.”

War porn is great for TV ratings, but bad for your mental health. Watching these images night after night leads to depression and passivity, emotions that are inimical to making smart investment decisions.

Below, I examine two reasons for long-term investment optimism: resilient corporate earnings and the growing economy. During the August-October stock market slump, these fundamental factors have been pillars keeping a floor under stocks.

Headline risk is a constant concern for investors, of course. But retain your long-term perspective. Wars aren’t new, they’ve always been with us, and they eventually end. History shows that when external shocks dissipate, the markets bounce back. Don’t let the latest strife in the Middle East drive you away from risk assets.

Read This Story: Is a Stock Market Rebound in the Cards for Q4?

For third-quarter 2023, the projected year-over-year earnings decline for the S&P 500 is -0.3%, according to FactSet. That number seems lackluster, but trends point to a gradual improvement in corporate profitability.

Analysts have been getting more optimistic. On June 30, the estimated year-over-year earnings decline for the S&P 500 for Q3 2023 was -0.4%. Upward revisions to earnings estimates have been gathering momentum.

Analysts are projecting year-over-year earnings growth of 7.8% for Q4; 0.9% for calendar year 2023; and 8.2% for Q1 2024.

Despite the latest spate of troubling international news, we’re still on track for an economic “soft landing” in the U.S. The Bureau of Economic Analysis recently reported that U.S. real gross domestic product (GDP) increased at an annual rate of 2.1% in the second quarter of 2023. On October 10, the Atlanta Fed projected that GDP would come in at a robust 5.1% in Q3, up from its previous forecast of 4.9%.

The numbers, sans superstition…

The kick-off to Q3 earnings season occurs Friday, October 13, with, as customary, the Big Banks. (I won’t follow the lead of the media and make dumb jokes about Friday the 13th.)

The next two weeks will be pivotal in the market’s direction for the rest of 2023, as the financial services sector takes center stage with the operating results of a bevy of large players, including American Express (NYSE: AXP), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), and Wells Fargo (NSE: WFC).

The analyst consensus estimates that the financials sector will report the fourth-highest year-over-year earnings growth rate of all 11 sectors for Q3 at 8.7%.

When the bank numbers start coming in Friday, Wall Street will focus on the effects on capital levels of the 76 basis points (bps) increase in Q3 in the 10-year Treasury yield. The following chart tells the story:

It’s auspicious that the 10-year yield has retreated in recent days. Bond yields and stocks tend to move in opposite directions, largely because higher interest rates weigh on future corporate profits. Analysts will scrutinize the degree to which Q3 bank deposits have stabilized.

Read This Story: Blood and Oil: Israel-Hamas War Roils Markets

The war between Israel and Hamas is likely to last several weeks. There’s no sugarcoating the fact that the equity markets have been in an autumnal slump, although on Wednesday the main U.S. stock market indices closed mostly higher as follows:

• DJIA: +0.19%
• S&P 500: +0.43%
• NASDAQ: +0.71%
• Russell 2000: -0.15%

Traders are preparing for the next U.S. consumer price index (CPI) report, which is due Thursday. Expectations are that the CPI will continue to show moderating inflation. Global stocks edged higher and Treasury yields continued to fall.

Look beyond the war. Historians estimate that during the past 3,400 years, humans have been entirely at peace for a cumulative total of only 268 years. It’s why global armaments budgets are astronomical. It’s also why modern financial markets have bounced back fairly quickly from declines caused by outbreaks of military violence.

Current geopolitical turmoil poses challenges to the global economic recovery, but I’m confident that underlying fundamentals remain strong enough to prevent the market’s weakness to lapse into a prolonged bear market.

If you’re still looking for market-thumping gains amid this frustrating investment climate, consider the advice of my colleague Jim Pearce, chief investment strategist of Personal Finance.

Case in point: If you had taken the initial recommendation of Personal Finance to buy Chevron (NYSE: CVX), and held on, you’d be sitting on a whopping return of nearly 3,200% (that’s not a typo).

Jim Pearce just found “The Next Chevron” and it’s poised to soar. Want to get in on the action? Click here for details.

John Persinos is the editorial director of Investing Daily.

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