- There is an epic battle of market influence underway between two powers of today's fight game: Federal Reserve Chair Yellen and Russian President Vladimir Putin.
- Yellen is the champion who serves to uplift stocks with her focus on labor market slack, appeasing concerns about faster Fed rate action.
- Putin is the dark challenger who threatens to sink stocks with a surprise uppercut at any moment to the heart of Ukraine.
In the epic battle of stock market influence between Brooklyn-born Janet Yellen and the pride of Russia, Vladimir Putin, Yellen has taken the first round on points. Namely, the S&P 500 gained by a half point Monday, rising to touch an all-time record high above 2000. Because of the strength just recently projected by today's market champion, Fed Chief Yellen, I see higher ground for the SPDR S&P 500 (NYSEARCA:SPY) over the next 1 to 3 months, until the next challenger arrives. Still, the formidable challenger, Putin, is capable of a surprising uppercut deep into Ukraine at any moment, and could down the champ and stocks in like time.
In my report published on Saturday, I asked the reader who would win in the battle of market influence between Yellen and Putin. Well, the judges scored the first round unanimously in favor of Yellen, as checking the news, despite a Ukraine claim that a column of Russian tanks had rolled into Southern Ukraine, stocks still rose yesterday. Even as Russia notified the world that it would be sending a second aid convoy to Russian separatists in a nation they had just invaded a few months prior, stocks rose. Even as Ukraine said the first convoy stole Ukrainian industrial goods, stocks rose. Why?
Because Janet Yellen's body blows are long lasting. The Brooklyn bomber, reminiscent to me of one "Irish Jimmy Flood" in her tenacity, will to win, and brute force, promised of measured interest rate action with an accounting for the vaguely visible labor market slack. In English, that means the Fed will not necessarily raise interest rates sooner just because of stronger economic data. It will instead defer to that foggy figure known as labor slack, which exists today due to the financial crisis and great recession. She sure is quick and hard to hit.
Last week, the market was concerned that extremely positive economic data could spur the Fed to act sooner, and then the bomber showed up on Friday to set things straight. She's the champ, and Putin is the challenger. However, Putin is a notorious contender.
The former spy boss-turned-President powers a confounding force in Eurasia. Against Western logic, his answer to a turnover in government in Ukraine that did not favor Russia's friendship was to annex Crimea, where without coincidence, an important Russian military base shadows over the Black Sea. He today sends weapons and military hardware across his border with Ukraine, and somehow the East doesn't know about it until a reputable reporter acts as eyewitness. This tough kid who often trains using old-world techniques, bare breasted and among wild animals, confounds the world.
Over the past year, his fast flurries, reminiscent of Sugar Ray Leonard, have stunned the S&P 500 time and again. But there is a dark side to the challenger. He has even been questioned, first by your author here, and shortly after by Barron's, of fixing matches. In its hard-copy edition, which some of us read, Barron's asked a couple weeks ago if Putin was a market manipulator because of the swings in trading following new news of Russian actions. It's a fact that Russia is active in the gold market, so why not the stock market as well. Anyway, that's a question for the fight regulators.
I found it astounding that on Monday, while supposed tanks were rolling, stocks were roaring. SPY, which tracks the S&P 500, touched its all-time high of $200.59, and appears to have its sights set higher. It is a dream enabled by Janet Yellen, because we all know this recovery is aging and the market will soon be required to face its next great challenger, too robust economic growth and the rising fight promotion costs that come with it, or inflation in economic terms. For now, though, and for as long as the challenger, Putin, does not produce a surprise uppercut deep into Ukraine, I see the SPY capable of greater things. My timeline is 1 to 3 months, though, before the economic issue gets too hot and requires market attention to refocus again on the coming interest rate rise. I cover the market daily, so readers may want to follow the column.