US Markets Yawn at Ukraine (For Now)

On Monday, financial news outlets reported breathlessly on markets’ reactions to the crisis in Ukraine*. The Wall Street Journal said the events “rocked global financial markets.” Television business anchors used words like “roiled” and “tumbling.”

But from the point of view of a professional trader, the reaction of almost every market outside of Russia and Ukraine and their immediate neighbors was downright tame.

Russian and Ukrainian stock market indices each posted losses of between 11 percent and 12 percent Monday, which certainly represented disastrous single-day moves. For context, there have only been three double-digit percentage single-day drops in the history of the Dow Jones Industrial Average and two of those occurred during the 1929 stock market crash. Since the S&P 500 was created in 1957, the U.S. has suffered 1987’s Black Monday drop of just over 20 percent but no other drop in excess of 9 percent in one trading day.

The Polish stock market, near enough to the crisis to be worried, fell just over five percent while Hungary’s Budapest Stock Exchange fell 3.5 percent. Given that there is little liquidity and often high volatility in these markets, even these drops hardly signaled sheer panic.

Further away, in Western Europe, markets were all down, with the amount of the sell-off roughly correlating to their proximity to Russia: Germany’s DAX index was down 3.4 percent, France’s CAC 40 was down 2.7 percent, and Britain’s FTSE 100 fell 1.5 percent.

Gold and silver rallied, as is typical during periods of global instability, but with gains of 2.3 percent and 1.1 percent, respectively, even these panic-prone markets were relatively calm. The same goes for crude oil, which was up almost 2 percent the U.S. and only 1.6 percent in Europe. U.S.-traded wheat futures were up 5 percent, a very large move; Ukraine is a substantial exporter of wheat and war could obviously throw a wrench into that.

There are also rumors that Ukrainian farmers are hoarding wheat supplies to use as currency in case the turmoil causes a further plunge in the Ukrainian hryvnia — which on Monday fell about 7 percent, to a record low, versus the U.S. dollar. Corn was up to a smaller degree, but for the same reasons. (Surprisingly, the biggest commodity mover of the day was coffee, up more than 9 percent, on fears of a bad crop in Brazil — which even Russian President Vladimir Putin’s superpowers can’t influence.)

In the United States, the S&P 500 closed down about 0.75 percent, toward the high end of the day’s range, with talking heads on Fox Business and CNBC wondering aloud whether the market reaction implies that the Ukrainian situation may not be as serious as the initial worldwide reaction may have suggested.

There’s a well-known saying about my people: “Two Jews, three opinions.” But when it comes to having so many opinions as to be utterly meaningless, the real champions are financial market pundits.

Please read the entirety of my article for the American Spectator here:

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