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%.
Chief Economic Strategist Managing Director
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