March 16, 2015
Weekly Market Outlook
By Keith Schneider
A soaring dollar, collapsing energy prices and virtually all commodities, took a toll on equities markets this week. Amid big volatility, indexes swung back and forth with two key US equity markets ending the week in warning phases. Last week we spoke about how money was being sucked out of the equity markets into those mysterious Siberian sink holes, especially anything Russian. For the moment that now seems prophetic as we can add Russian president Vladimir Putin, otherwise known as the Shirtless One, into things that has been sucked into that vortex. Unless of course this could be just another magic trick and Putin reappears after a weeklong sabbatical. The excuse might be that he was getting his wardrobe ready for the celebration of last year’s annexation of Crimea.
The prospects of a Putin replacement clearly unnerved markets already unsettled by the roaring dollar, ongoing currency wars and the enduring battle with deflation. It’s hard to fathom, but Putin could be considered moderate when compared to hardliners lurking in the shadows of the Kremlin. The backdrop of an already weak western leaning opposition party now exacerbated by the assassination of Nemstov is noteworthy as well. There is speculation that Nemstov was removed in a power play by unhappy Oligarchs with a helping hand by the KGB and that Putin was next. Putin’s play of buying gold and getting oil prices up thru international tensions have not worked.
It’s important to consider the potential impact of Geo Politics on the markets, especially major game changers. This is the case with a country like Russia with massive nuclear capacity and as the major supplier of energy to Germany, the leading economy in Western Europe. The impact of a deeper freeze with Russia will be a drag on the global economy. Poland for example, is very fearful of Russian expansion in the Ukraine and worried they might be next.
Meanwhile the Euro is in a free fall on its own accord, but nearing some long term support which if it holds could spur a rally in the US equities market and maybe even gold. The smaller cap stocks here in the US have been holding up well, as they are less impacted by foreign trade and the soaring dollar. Market Internals are nearing oversold with the Indexes hovering around or just under their 50 day moving averages, so a bounce from here or just a few clicks lower seems in the cards unless that Russian black swan takes flight.
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