Since the S&P 500 reached its record on July 24th, it is down roughly 4.0%, but has recovered 2.0% of that loss since the August 7th recent lows of price level 1909. To a certain degree, it seems as though Q2 earnings season has been lost to this current of headline risks. That’s because geopolitical risks continue to take center stage. There is some commentary suggesting that the overall number of geopolitical events is not any higher today than at any other time. That may ultimately be proven true, but it can only be measured in cycles rather than in contemporaneous study. In addition, the velocity at which our present stash of geopolitical events are going from problem-to-conflagration-to-unsolved lingering issue seems quicker than that of previous cycles.
Let’s review. Some of the immediate geopolitical headline risks to markets are:
- Ukraine conflict: Russia is possibly interceding in a sneaky way (with the help of the Red Cross…?) and bumbling Ukrainian officials;
- Iraq conflict: US intelligence doesn’t know if there are 4,000 or 40,000 people stuck on a mountain top. It looks like the former this morning and looks like the US will not further intervene. It also looks like the country could implode again at any time as it is a leaderless ship;
- Syrian civil war: stalemate for now, but ISIS/ISIL has just completed a nasty gerrymandering exercise that will not please Assad;
- Ebola: not likely to affect global risk markets so long as it is contained to frontier market countries; and,
- Israel-Gaza conflict: looking increasingly like the brutal methods employed on both sides will end in an outcome favoring Israel for the time being.
There are many other geopolitical hot spots including China vs. Japan, North Korea vs. The Rest of The World, Iranian nuclear ambitions, etc. As a proxy for measuring knee jerk reactions to these risks, the purest indicator may be the CBOE Volatility Index – the VIX.
Since July 24th (the S&P 500 record close) the average daily move in the VIX, in percentage terms, is 4.97%. That is high and proves that US markets are subject to headline risks.
Is there more geopolitical risk in the world today than at previous times? The answer is “most likely, yes.” When the only hegemony and world power recedes to domestic squabbles all the while encouraging regime change in the least stable region of the world (the Middle East), it tends to lead to increasing world chaos. The real question to all of this may be how quickly investors get used to a consistently higher quanta of geopolitical risks. Only time (and the VIX) will tell.
DISCLAIMER: NOTHING HEREIN SHALL BE CONSTRUED AS INVESTMENT ADVICE, A RECOMMENDATION OR SOLICITATION TO BUY OR SELL ANY SECURITY. PAST PERFORMANCE DOES NOT NECESSARILY PREDICT FUTURE RESULTS. SEEK THE ADVICE OF AN INVESTMENT MANAGER, LAWYER AND ACCOUNTANT BEFORE YOU INVEST. DON’T RELY ON ANYTHING HEREIN. DO YOUR OWN HOMEWORK. THIS IS NOT A RESEARCH REPORT. THIS IS FOR ENTERTAINMENT PURPOSES ONLY AND DOES NOT CONSIDER THE SUITABILITY OR INVESTMENT NEEDS OF ANY INDIVIDUAL.
Recommended for You
AP Mark Cuban is the owner of the Dallas Mavericks. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:Business Insider
Jeb Bush entered the Florida governor's mansion in 1999 with a net worth of $2 million, a relatively modest fortune compared with others in the Bush family. Within months of leaving office, he started a consulting firm, registered as a broker for Lehman Brothers and joined a number of corporate…Associated Press
In July, Bill Gates may or may not have lost his title as the world's richest man. According to Forbes, Gates has a net worth of almost $82 billion, which puts him in the No. 2 spot behind Mexican telecom magnate Carlos Slim, who's worth $85.4 billion. According to Bloomberg, Gates is still the…Business Insider
Recent clinical success in cystic fibrosis positions Vertex as a dominant player in this attractive rare-disease market.Morningstar
The late Jim Paul went from a poor Kentucky boy to serving on the board of governors of the Chicago Mercantile Exchange through a series of lucky breaks and smart investments. By 1990 he was working in the futures research department at Morgan Stanley Dean Witter & Co., managing a team that…Business Insider
Silver is getting crushed. On Friday, Silver fell more than 3% to less than $18 an ounce, its lowest level in more than four years. The price of gold also fell about 0.8% and touched its lowest level since January.Business Insider
The price of bitcoin has plummeted in the past few days, and some are blaming the Alibaba IPO for the virtual currency's fall. Members of the bitcoin community are pointing fingers at the e-commerce giant's IPO, suggesting that tech-minded China-centric money is being pulled out of the currency in…CNBC
Right in the middle of the midterm election season, and just before Attorney General Eric Holder reportedly might step down, he made it known that the Justice Department will really really indict Wall Street executives in financial fraud cases. “We expect to bring charges in the coming months,”…The Fiscal Times
Cory Frugé, a commercial airline pilot, first learned of Ltd. about four years ago when he set out to build a private runway on his property in Iota, La. He needed to buy lighting for the runway and in his search for affordable solar-powered lights he stumbled on Alibaba's website. On Friday…The Wall Street Journal
Buyers from China, deprived of the latest iPhone launch at home, were Friday among the first in line in Japan to grab the "6" and its new large-screen cousin as Apple hit back at rivals. Licensing problems in China meant the global rollout went ahead without the huge and lucrative market, in a blow…AFP
In a widely publicized note to investors, Gary Balter of Credit Suisse said that it is best that Sears Holdings Corp. (SHLD) close its Sears and Kmart locations while they, and the inventory they sell, still have value. Sears Holdings operates about 2,350 stories. Sears is generating negative…24/7 Wall St.
Even after the Dow (Dow Jones Global Indexes: .DJI) and the S&P 500 (^GSPC) closed at new all-time highs, closely followed contrarian Marc Faber keeps sounding the alarm. Faber has long argued that the Federal Reserve's massive asset purchasing programs and near-zero interest rates have inflated…CNBC
On Wall Street, the Alibaba IPO feels every bit as magical as its exotic namesake as investors clamor for a piece of this exciting story and dream about its hidden riches. If you're about say "Open sesame" Jim Cramer doesn't want you to get carried away. "I am blessing paying as high as $80 a…CNBC
On Friday, Alibaba is set to make its debut on the NYSE in the largest IPO ever. Jesse Livermore, the pseudonymous blogger of Philosophical Economics, on Thursday night noted that in 2012, Facebook's IPO marked the market bottom for the year, and sees Alibaba's debut as potentially marking the top…Business Insider
New Boeing 787 Dreamliners taking off from Paine Field in Everett, Washington. It took Boeing Co. 10 bumpy years to turn its 787 Dreamliner concept into a commercial success. At least that's the conclusion from aerospace analysts at Jefferies, who in a note published Thursday write that all those…MarketWatch
Yahoo is making amends for years of blundering with one smart move: an early investment in Alibaba Group that has turned into a multibillion-dollar boon. The latest windfall came with Alibaba's record-setting IPO completed late Thursday, in which the Chinese e-commerce giant raised $25 billion.…Associated Press
Morningstar director of equity research R.J. Hottovy joins MoneyBeat and explains why he views the company's shares priced conservatively at its IPO.WSJ Live
All eyes are on Alibaba Group Holding (BABA) as the Chinese e-commerce giant makes its U.S. Alibaba dominates Internet sales in the world's most populous nation, moving more merchandise than Amazon.com (AMZN) and eBay (EBAY) combined and serving up healthy profits. When the stock begins trading on…Kiplinger
Alshon Jeffery of the Chicago Bears has become the fifth National Football League player to enter a brand contract with Fantex, Inc., which bought 13 percent of his future earnings for $7.94 million in advance of selling shares in the Pro Bowl receiver to the public. Fantex also has agreements with…Bloomberg
Check out the new Sonata's impressive list of advanced safety technology that surrounds you with Smart Cruise Control, Blind Spot Detection and more!AdChoicesHyundaiSponsored
Alibaba (BABA) shares hit the market Friday amid much hype, becoming the biggest initial public offering in U.S. For one, since it's an IPO, it's probably overpriced, Barry James, president of James Advantage Fund, told CNBC. "When you look at initial public offerings, 80 percent of them lose money…CNBC