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Despite Ukraine crisis the macro trend is still your friend: Karabell


Stocks got squashed on Monday as International tensions gave traders a better than average excuse to take gains. The iShares MSCI Emerging Markets (EEM) ETF dropped more than 2%, the Russian Market Vectors Russia ETF (RSX) plunged more than 7% and the S&P500 (^GSPC) dropped deeper in the red for 2014.

In the attached clip Zach Karabell notes that the putative cause of all this selling isn’t exactly new. In fact traders have been playing by the antiquated playbook ever since the Fed started tapering. That is to say there’s been money going out of so-called risk assets and buying US Treasuries (the yields on which continue to defy expectations and move lower with the interest rate of the 10yr all the way back to 2.6%).

Karabell isn’t ready to dance on the table screaming “Buy!” but he doesn’t see much cause for panic, either. “I can’t call whether or not we’re going to have another 10% worth of volatility over the next 2 months based on Ukraine” he concedes, “I think you continue to ease in while these things go down with the full recognition and acceptance that the timing could be off.”

Whatever happens in Ukraine over the coming months is unlikely to reverse the trend of more than a billion people moving out of an agrarian lifestyle and into the working and middle class. The turmoil in Ukraine is an enormous, one time, world altering change which once done can never be repeated. In contrast global tensions fluctuate but never disappear.

With regards to portfolio management, global equities are slightly cheaper than they were last week.  The bottom for this move will only be apparent in retrospect.

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