March 31, 2014
Weekly Market Outlook
By Keith Schneider
The big news this week is that Putin called Obama to “resolve” the crises is Crimea, actually, make that the Ukraine and Moldova, as Crimea problem has been solved, with a slight re-arrangement of the geo-political chess board. Rumor has it that Putin really called Obama to play a friendly game of Risk while he was in the neighborhood. The game would not be the same without Merkel, so we expect her to get an invite as well. No other players were invited, so it will be interesting to see how the alliances morph and if Obama can make a side deal with Putin and get him to stop amassing troops on Ukraine’s border. Most EU members including Germany are willing to let Russia get away with just a slap on the wrist, unless of course annexation or invasion includes them as well. Obama’s primary objective is to not look too weak at home, as mid- term elections are coming up and of course to avoid a war at all costs as the US public’s appetite for yet another one is not there, regardless of the rhetoric on Capitol Hill.
Putin and his cronies are most likely watching the ticker tape and it’s not pretty. The Russian stock market is down 20% this year, so pushing things much further might not be a good move for Putin. Capital is flowing out of Russia faster than they can push energy out, which accounts for a large part of their GDP. Russia’s once robust economic growth has slowed as a result of rampant corruption and virtual dependency on energy exports, and is now projected to come to a standstill over the next few years as capital leaves.
US stocks have stalled as well, with the hot NASDQ 100 shedding 5% over the past two weeks since the crisis went from a simmer to a boil. Several strong rallies have petered out by the days end on several occasions, including last Friday; not a great sign. However, there are some signs of life, such as our sentiment indicators.
It might be prudent to keep an eye on markets not directly in the crosshairs of this conflict, so this week’s video we will take a gander at Emerging Markets, Brazil, Mexico and China. (EEM, EWZ, FXI and EWW).
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