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Who

said the U.S. stock markets couldn’t surprise us? Amidst rising tensions in the

Middle East stock markets have done the impossible – surfaced into positive

territory. U.S. jet fighters recently bombed militants in Iraq while the

conflict in Gaza resumed post a 72 hour cease fire. And yet U.S. stocks made a

turnaround from Wednesday when a posing threat of Russia invading Ukraine

loomed on every investor’s mind. So the question to be asked then is what is

happening? Why such positivity in the market that morning?

All

fingers are pointing to Russia. Ironically the nation that created unrest in

the market on Wednesday is the remedy that brought some stability the following

day. Traders said that easing tensions in the Russia and Ukraine conflict

eradicated some of the anxiety investors had earlier on in the week. According

to the Wall Street Journal, the

secretary of Russia’s Security Council Nikolai Patrushev told a local Russia

agency that: “Russia will continue to make all efforts for a very fast de-escalation

of tensions.” Apparently Mr. Patrushev’s words were very comforting for those

in the U.S. Easing tensions contributed to a stronger Dow Jones Industrial

Average, which was up about 80 points.

There

are those, of course, that neglect this view all together. Some believe and

often stress that many international geopolitical events are unlikely to be the

main contributing impact of major U.S. indexes. Lawrence Creatura, portfolio

manager at Federated Investors, said the following in a recent interview with

the Wall Street Journal. “In many

cases, these are horrible human tragedies, but they are not particularly major

economic events. Earnings next quarter likely won’t change based on this

morning’s events, and that’s what the stock market cares about.” It would seem

that the words of Mr. Creatura aren’t too far fetched. If we look at previous

market conditions we will see that the decade long depleting conditions in Iraq

have had few lasting effects on the market. Many would be dubious of the recent

airstrikes having a major impact as well.

It

can’t all be good news, however. The bond market is reflecting a more realistic

outcome. Benchmark government bond yields in the world’s most advanced

countries fell to fresh lows in 2014. According to data compiled by the Wall Street Journal, the yield of the 10

year U.S. Treasury note has dropped below 2.4% for the first time this year. It

also traded at its lowest level since the June 2013.

We

all know that the market is inclement to say the least. In global turbulent

times, it is fair to say that not everything impacts the mindset of investors

or the stock market, however there is still need for skepticism. After all we

are not mind readers. At best, we all have our estimations but no one can

guarantee an end to the Ukraine conflict or an overnight solution for Gaza.

Even if there are periods of stability, what we are generally seeing in the

past few days are moments of calamity. Even though stocks were on a cheery note

that day, we cannot be certain for tomorrow let alone next week.

Disclaimer: This article was posted with the permission

of a third-party contributor and the opinions contained therein do not

necessarily reflect those of Smallcappower. Smallcappower does not endorse

any investment advice provided by these third-party contributors.

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