The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Unfazed.
Venezuela was the big story but it didn’t bother capital markets. S&P 500 futures traded about +10 overnight and climbed to +20 before the open. The index actually opened about +40 and climbed further in the first half of the day. The tape gave back some in the afternoon and the index finished with a modest gain. The rally was reasonably broad and the energy and financial sectors led the way. Mag 7 was mixed. The yield curve started the day unchanged but yields came in small over the session. Capital flow was a bit higher at 112%.
Perhaps markets would have zoomed around frantically had the Venezuelan news not broken when it had. Global markets had to wait to print their reactions and a lot of news broke in the meantime. By the time Asia opened, the shock value was past and the investor conclusions were already in, investors didn’t view the huge geopolitical event as altering the investment landscape. The calm of Asian markets allowed European markets to trade calmly, which allowed our markets to trade calmly. The level heads across the globe allowed risk-on investment moves to prevail and stocks benefited.
As always in the early moments of geopolitical earthquakes, the initial reactions are subject to change. Usually, the initial market move is towards panic, which lessens with time. This situation presents us with an initial move towards indifference, maybe even optimism. Is that reaction going to lessen with time? Will unforeseen consequences pop up and affect markets?
The answer is yes. The subsequent question is whether the impact of the unforeseen will be material. Markets instantly voted that it wasn’t. It may take months, or years, to confidently determine whether those initial judgements were correct.
See you tomorrow.
-Mike
Visdom Market Commentary
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