It appears the market week will end this week as it started – up a bit today but lower overall. As of this writing, the Dow is down some 700 points off its record high, which makes it just about 4.2% lower. The S&P is down some 70 points from its record high, which makes it just about 3.6% lower. Decent minor corrections that will bring earnings and P/E ratios closer to a place investors like.
The VIX will likely finish the week lower as will oil. It appears gold will finish the week higher, but today it is dropping, a signal that the thing that was not a problem until it was this week is tempering.
- U.S. stocks rose, after the Dow Jones Industrial Average fell to the lowest since April yesterday, as a report that Russia wants to de-escalate the crisis in eastern Ukraine outweighed American airstrikes in Iraq.
All in all, not a bad week considering the bears applied a ton of pressure. The bulls fought hard with the good economic data, but, in the end, they just did not have the numbers to win the day. No worries, though, they will have the numbers come this fall.
As for now, US airstrikes in Iraq don’t seem to be an issue for the market. Over in Russia, though, we should not discount Putin’s ability to say one thing and do another. Ukrainian government forces are closing the noose around the rebels’ necks and Putin is now in a corner with all of this. Will he choose saving his country economically over saving face with war?
In the meantime, I received a pertinent question relative to the economic war between the US/Europe and Russia.
- The news about the European Banks appears to indicate some investing opportunities. Do you think the troubles with Russia and their embargo will have any impact there? Or will this just be a “blip” on the screen?
The reader is correct. European banks have been in the news lately, particularly the big banks in Portugal and Greece and their on-again problems. The ECB gaining more control over all the banks in the EU is newsworthy as well. Oh, and Mr. Draghi is looking to go back to the well to prop up Europe.
- Mario Draghi says preparatory work in place for quantitative easing to combat deflation and economic stagnation.
I don’t see investment opportunities in European banks, but I do see opportunity in increasing exposure to European markets. At the moment, the war between Russia and the West will have an impact on Europe as a whole, but if Ukraine finishes off the rebels in short order and Putin chooses to save his country economically rather than saving face, the sanctions and the food embargo will end, thus bringing a positive response from the European markets.
On top of this possibility is Mr. Draghi offering more QE in Europe. This action will spur more economic activity, just as it did here in the US, and this will further boost the European markets.
Although the economic war between Russia and the West is a bit bigger than “a blip on the screen,” in the short term, in the longer term it just might be seen as that. So, yes, I believe that the war in Europe will end sooner rather than later presenting opportunity in European markets.
Trade in the day; invest in your life …
