Today’s trouble in the Middle East is reminiscent of the 2011 Libyan civil war. By April 2011 oil prices were rising, WTI peaked at around $111 and Brent was over $126. The S&P500 had been in an uptrend and topped on April 25. By August the index had plummeted 18% from April’s high.
That 2011 downturn has been the only real correction the market has seen in almost three years.
Today, unrest in Iraq brings $107/barrel oil but the market seems unconcerned. Is the market resilient or just arrogant?
Markets don’t like uncertainly. I believe we face much more uncertainty than in 2011. Off the top of my head- Obamacare’s drag on the economy, Russia/Ukraine conflict, Iraqi government falling apart, continuing violence in Syria, a coup in Thailand, China’s troubles with Japan and the Philippians, Europe’s deflation, Japan’s inflation, England’s overheating, China’s cooling, and mid-term election uncertainty [e.g. incumbents are running scared- Eric Cantor the House Republican Majority Leader lost the primary to an unknown].
The only sure thing is that the Fed will keep interest rates low, or so the market hopes. Tuesday and Wednesday of this week the Fed’s open market committee will meet to keep the charade alive. Time will tell if that’s enough to keep this market making new highs.
Call me a cynic.