Monday, March 03, 2014

Monday Morning Musings

Markets are lower this morning amid tension in the Crimean Peninsula.  Over the weekend, Russian forces seized control of several points in Southern Ukraine.  International powers have called on Russia to stand down, but so far to no avail.

This type of military tension is weighing on investor sentiment for now, but when you think about it this type of event is not really one that is likely to impact corporate profits here in the US.  So it will probably prove to be a short-term blip, at least for stocks.

The volatility index is really reflecting the concern, with the VIX up over 14% to the 16.0 level.  Treasuries are also seeing a bit of a flight-to-safety trade, with bond prices up and yields moving lower to 2.62%.

In economic news, the February ISM Index rose to 53.2 from 51.3.  So there is some good news in the manuf sector, despite the inclement weather we have seen.

Separately, both personal incomes and personal spending rose in January.

Asian markets were mixed overnight.  China rose after its HSBC manuf PMI ticked up to 48.5 from 48.3.  The non-manuf PMI also improved to 55.0 from 53.4.

European markets are also lower across the board despite some upticks in regional PMI readings in the Eurozone.

Trading comment: Markets have been strong lately, with fresh breakouts to new highs and strong leadership.  Events like what is happening in Ukraine are usually emotional events that rattle investors in the short-term but don't have a lasting effect.  Actually most military conflicts turn out to be good buying opportunities in hindsight.  The market had reached overbought conditions, so this pullback isn't a bad thing.  We will likely use this weakness to put cash to work in recent breakouts that are pulling back to logical support areas.


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