Market Overview

Wednesday's Market Minute: Military Tensions Building, Rotation On Hold

Wednesday's Market Minute: Military Tensions Building, Rotation On Hold

There’s a lot going on as 2020 kicks off with an escalating geopolitical risk that was on very few strategists’ minds when blasting out their yearly outlook just weeks ago. It’s a nice reminder that predicting markets is a largely futile effort, much less over a 12-month span. There may be a second investing lesson right behind this Iranian flare-up as well, though: events without material impact to corporate fundamentals have limited effects on the stock market. Coming into 2020, the stock market was in the midst of a pretty epic rotation.

The fourth quarter was marked by a shift in equity leadership toward economically sensitive companies as Treasury yields gradually rose and investors backed away from safe-haven assets like gold. Now that’s on hold, and if one judges by the price of gold, possibly taking a giant U-turn. But gold in moments of shock takes on the role of a catch-all safety net of sorts. Worried about the Middle East? Gold! Worried about a slowing economy? Gold!

Worried about a too-hot economy? Gold! What will be more important to monitor is if the Treasury market resumes its correlation with gold by rallying as well. If that’s the case, the rotation built around economic stabilization will be in doubt, and then we’re back to a much more fundamental worry: stagnation and recession.

Image by skeeze from Pixabay


Related Articles

View Comments and Join the Discussion!

Posted-In: Earnings Government News Regulations Emerging Market ETFs Commodities Options Global Best of Benzinga