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Will Geo Political Issues Ever Impact the Markets?

Will geo political issues ever impact the markets?  Perhaps the correct answer is when these issues start impacting economic activity.

If the markets are the discounter of all things and bad, investors are stating the US and its allies will do nothing of great significance in retaliation of Russia invading the Ukraine.

Yesterday Bloomberg reported the largest Russian ETF attracted almost $200 million this month, the biggest inflow since March.  The Micex Index—the equivalent of Russia’s Dow Jones—is up about 17% from its March 14 and is only down 3.7% YTD.  Short interest in the Russian stock market at 5.5% is the lowest in a month according to Bloomberg.

Wow!  If money speaks the truth, the above data offers great evidence the US is only full of bluster, the ultimate paper tiger.

While most, I included, welcome the lack of decline, as a student of international studies I am frightened by the lack of a meaningful action.

Treasuries rose in price yesterday pushing yields to their lowest levels in 15 months on Ukrainian tensions and speculation that the ECB will buy bonds.  In my view the Treasury is more overvalued today the NASDAQ was 14 years ago.  When sentiment changes, the decimation in Treasuries will be great.

Today activity is expected to be quiet given the three day holiday.

Last night the foreign markets were mixed.  London was up 0.17%, Paris up 0.20% and Frankfurt up 0.11%.  Japan was down 0.23% and Hang Sang flat.

The Dow should open moderately higher on economic optimism.  The 10-year is off 2/32 to yield 2.34%.


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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.