You really have to pity the permabears. They really thought this was it. Having abandoned to the trash heap of history last week's "hot chart" showing similarities between 1929 and 2014 it was time to jump on the nearest hobbyhorse they could find.
For a day they had it! War in Ukraine! Politically, the left feared intervention; the right emasculation of American influence. The verdict either way: sell stocks.
Fortunately investors on Wall Street have far more intelligence and a far longer term perspective than pundits give them credit for. Pat Buchanan summarized the historical record better than anyone:
- When Red Army tank divisions crushed the Hungarian freedom fighters in 1956, killing 50,000, Eisenhower did not lift a finger.
- When Khrushchev built the Berlin Wall, JFK went to Berlin and gave a speech.
- When Warsaw Pact troops crushed the Prague Spring in 1968, LBJ did nothing.
- When Moscow ordered Gen. Wojciech Jaruzelski to smash Solidarity, Ronald Reagan refused to put Warsaw in default.
- These presidents saw no vital U.S. interest imperiled in these Soviet actions, however brutal. They sensed that time was on our side in the Cold War. And history has proven them right.
- What is the U.S. vital interest in Crimea? ZERO.
As I put it here, exactly why is it bearish for a bully socialist republic like Russia to get tangled up (as they are) in the consequences of their own economic stupidity?
Of more relevance to investors, all of the bulleted events highlighted above were nothing more than bumps along the way to higher stock prices in the Post WWII era.
Look at the facts:
- SPY and QQQ, the ETFs for the S&P 500 and Nasdaq indices, respectively, have soared to new 2014 highs.
- DIA and IYT, the Dow Jones Industrials and Transportation ETFs have nearly joined the party but still are standing on the veranda. Watch closely to make sure they hit new highs soon.
- Medical stocks, and medical technology stocks, which have been market leaders for two years, have recaptured their cachet in recent trading: just look at XLV and IHI, respectively.
- The unemployment rate isn't 25%. or 17% It is 6.7%, and falling. Heck I show here it might already be 5.9%!. Janet Yellen has made clear (so far) tapering prospects will continue to focus on domestic, not foreign, issues.
- The inflation rate is not 10%. Or 5% Or some other ungodly rate cooked up by folks who claim the Bureau of Labor Statistics is using hanky panky to massage the figures. Heck, might there be good evidence the inflation rate is actually zero?
All of those statistics are very bullish for stocks. Don't let a one-day sell-off bully you out of a bull market.
Disclosure: I am long XLV, XLK, IHI, IYT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.