EC “Everyone Seems To Be Bullish … Here’s What Could Go Wrong”

What a buzz kill …

I was just beginning to think “Full Speed Ahead” was the order of the day. A tale of these potential woes was laid out this morning (8:57 ET–1/4/2020) in a post by CNBC markets editor Al Lewis. Though the article pulls no punches, it really is just a restatement of cautions that have been repeatedly given to us over the past 10 years, a period that has seen an almost fourfold increase in the the S&P 500.

Of course publication of this litany couldn’t come at a better time for market impact than the weekend after the U.S. takedown of one of the world’s really bad actors, Iranian Major General Qasim Soleimani. The market reaction following a week of new highs in the popular indices was pretty muted, down less than 1% on the Nasdaq, Dow and S&P 500. This muted response was pretty predictable in that the market has had 1 1/2 years to get use to the escalation of our hostile Iranian relationship. It started May 8, 2018 when President Trump abrogated the Joint Comprehensive Plan of Action (a.k.a. The Iran Nuclear Deal).

Since then we have seen an escalation of terrorist activity around the world. Not so much on US soil (except for acts of domestic terrorism) but on targets in the Middle East and Europe that are easier to get to. Yes, the Iranians will strike back and Americans will be killed. Cyber may become an issue but, like we’ve seen before, the violence will happen ‘over there’ and not ‘over here.’ Since most Americans do not travel outside the United States and most Americans do not have any skin in the game by having loved ones in the military and in harms way, my sense is that there will be little push back … the waste of life, human capital and our national treasure will continue unimpeded. This is depressing but I do not see it as a major increase in geopolitical risk. Geopolitical risk is a constant. it has been throughout our history.

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Bill Johnson 5 days ago Member's comment

Good article and congrats on being featured as an Editor's Choice. Well, you were clearly right in that the markets largely shrugged and rising tensions have not seemed to affect America at all. It was even better than you predicted with no loss of US life at all, not even any injuries. I wonder if the Iranians only attacked the US bases to save face and actually tried to avoid escalation.

Ayelet Wolf 5 days ago Member's comment

Don't forget about the 180 souls who perished on the Ukrainian Air flight shot down by Iran. That was a direct result of tensions with the US.

Bill Johnson 5 days ago Member's comment

Yes, a real tragedy. But not a single American was on the flight. And I don't think America can be blamed at all for that tragedy. The mess up is solely in the hands of Iran. And people of Iran who have been rioting, demanding the government step down, and chanting "America is not our enemy," clearly agree.

Alpha Stockman 1 week ago Member's comment

Enjoyed this.

Bill Kort 5 days ago Author's comment

Thank you Alpha. Thanks for your readership.