EDITOR'S NOTE
Well, my jaw certainly dropped when I saw that the U.S. killed General Soleimani last night.
This is not the kind of move that people in the market had been talking about or anticipating, hence the immediate selloff and flight to the safety of gold and such. But (a), this is barely more than a 1% drop in stocks, which is fairly routine, and (b) the knee-jerk panic that Soleimani's killing could trigger a war or major escalation with Iran may not be warranted.
As Nicholas Glinsman of EvoCapital points out, French media (which are close to Lebanon a.k.a. Iran proxy Hezbollah sources) are saying "it's actually likely that Iran will take a moment to take a breath and think about what to do next."
Writing for The Spectator, David Patrikarakos says that while "this is the most significant military assassination in the 21st century Middle East," Iran cannot take on the U.S. in a conventional battle, and is likely to resort to retaliation via proxy, as per usual. "Neither Iran nor the U.S. wants a war that it can neither afford nor properly win," he says.
Yes, as Patrikarakos observes, it's likely that this decade in the Middle East "might be even more turbulent than the last," which saw the rise of ISIS. But that's a tricky scenario for global markets to price in. Markets are good at pricing immediate risk--say, the outbreak of war--but less so longer-term conflicts (as we've seen all year with the U.S.-China trade talks).
So I don't think the Iranian drama--however epochal--is a huge market story. The more relevant point right now is that markets are starting to look for any excuse to sell. CNN's "fear & greed" index has almost a perfect "greed" score (97) right now, whereas at this time last year it was showing extreme fear (a reading of 12).
Today's selloff might be Soleimani-induced, the next will have a different trigger. But whatever turbulence stocks are in for right now, it's not a major event until this expansion ends. Back to watching jobless claims (which are still low during this volatile time of year), the unemployment rate, and other such factors.
And remember, you can now download our show ("The Exchange") as a podcast wherever you listen, and for some levity, you can also follow me on Instagram (@realkellyevans).
Have a great day,
Kelly
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Jumat, 03 Januari 2020
On selloffs and Soleimani
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