Salutary Law-breaking In The West Makes Eurasian Lawlessness Look That Much Darker And The Bulls Love It: The Geopolitical — Stock Market Connection

This weekend’s move by Switzerland to abrogate the law to the detriment of Middle East investors should be one more nail in the coffin of the bulls who believe the 2020s will be just fine after we get through the current crisis. Ignored are the cultural, geopolitical and economic changes wrought since COVID that only build on poor trends simmering for the past 40 years and which will eventually redound to the bear’s favor. But that is a long-term process not in play this week and likely to manifest only with more data points. For now the volatility risk premium points to a higher market over the next few days, while my technical reading of key stocks in the S&P 500 is bullish. Yesterday's cross-asset action brought one positive factor for US stocks. The action in major currencies indicates the $US is weak. But there were also several negative factors across global asset classes. Gold is trading as a risk-off asset. Oil is pointing to declining global GDP expectations. Expect the S&P 500 to rise moderately before consolidating over the next few days.

The bulls effectively cherry pick good facts while ignoring obvious countertrends, and beyond the stabilizing but clearly problematic ways global financial authorities are handling this crisis are the geopolitical facts across Eurasia. Key for the bulls is that Russia has failed to unite the European far right or to overcome Ukraine, instead helping Europe’s centrists to make common ground with illiberals and even neo-Fascists as Ukraine bides its time with increasing weaponry to launch a momentous Spring offensive.

DW notes “Italian Defense Minister Guido Crosetto said on Monday that the rising number of migrants crossing the Mediterranean is part of "hybrid warfare" waged by Russia using mercenaries as proxies on countries supporting Ukraine. "I think it is now safe to say that the exponential increase in the migratory phenomenon departing from African shores is also, to a not insignificant extent, part of a clear strategy of hybrid warfare that the Wagner division is implementing, using its considerable weight in some African countries," Crosetto said in a statement…Wagner is believed to be operating in several African countries, including Libya, Mali, and the Central African Republic. The group has been heavily involved in Russian efforts to capture the city of Bakhmut, in eastern Ukraine.”

Russia is the worst kind of autocracy, following no meaningful set of laws and treating the rest of the world with malevolent self-centeredness. The fact that neo-fascists in Italy are turning their back on the Russian fascist Putin is a sweet step away from the idea of fascism as a unifying force in Europe. But at the same time many autocratic Eurasian states are reaping what they’ve sown and being told to change their ways in a more liberal vein. Ironically it’s the very Saudis and other Gulf donors who were handled so brusquely by Switzerland who are now exerting a force for liberal government across their purlieu. They have steadfastly refused to bail Pakistan out unless the liberal reforms demanded by the IMF are accepted. MIDDLE EAST EYE notes “Saudi Arabia's decision to refuse to provide any further bailouts or interest-free loans to Pakistan has left the government in Islamabad in shock and has prompted the finance minister to complain that even friendly countries aren’t keen on helping Pakistan out of its economic emergency.”

And increasingly it’s India that’s attracting attention for being a liberal if bogus democracy with a proper economic policy fit for the rule of markets and laws instead of men. CNBC notes “But in 2023, not only is the goods trade deficit shrinking due to lower crude and commodity prices, the surge in services exports is shrinking the overall goods and services deficit to just $1-2 billion per month from a high of $10-20 billion per month in 2022. Indians living abroad and crediting money to families in India — called private transfers are also rising. This could touch $100 billion this year.”

As India rises so too will envy in Pakistan, and that could lead that trouble-making nation to finally move toward progress. And as far-right Europeans learn the value of European centrism so too recalcitrant leftists and illiberals across the continent might adopt more progressive laws and give markets a better chance. The facts add up to a hopeful if jejune argument for US equities, but that’s enough to power the bulls at this moment in time where financial instability has seemingly been averted by abrupt changes in laws and policies.

My current positions include a large cash position, 3M (MMM), Pfizer (PFE), and the levered ETF UPRO.