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Each week our investment policy committee meets to discuss different market scenarios and what we are seeing and hearing.
This morning the S&P 500 bounced off the 100 day moving average, around 1913. That, combined with the oversold readings we look at augur well for a potential bounce in the short term. This area around 1900-1919 has some very important support levels and psychologically important levels so we will be watching very closely how the market reacts around here.
Stocks declined again yesterday and everyone we talked to blamed increased tensions between Russia and Ukraine and weak economic numbers out of Europe. I am not that worried about Ukraine long term for the market but Europe bears watching.
I believe that Putin’s intention is to eventually take over the Ukraine in some way, shape, or form. He has commented in the past about how the breakup of the Soviet Union is a tragedy and he has gone through a lot of trouble if he wasn’t going to do anything. I also believe that he wants to put the entire Soviet Union back together and that he believes that the West will not intervene.
Forgetting for a moment the impact on people he conquers and the thought of a whole new cold war, I don’t believe that something like this would have any real long term ramifications for markets.
More problematic would be if Putin decides he wants the old Soviet Bloc put back together and he starts harassing Poland, Hungary, etc. We will cross that bridge when we come to it.
Europe is a potential long term problem. Economic issues there could also provide the trigger that moves the 10 Year Treasury back down to 2.25% (currently 2.45%). Lower economic growth could lead to a weaker Euro and the idea of buying our 10 Year at 2.45% vs. the German 10 Year at 1.1% could become even more attractive.
You Can’t Have Everything So What is Most Important?
There are basically three types of years in the market: