The current decline of haven assets has set the stage for an epic financial rebound. Stocks around the world started recovering, despite a hazy political future. The S&P 500 Index climbed while European banks nurtured the Stoxx Europe 600 Index back to par. News of a surprise election propelled the pound to new heights, while the dollar & the euro continued advancing. Gold slipped & oil stayed steady in the face of dropping stockpiles. This seemingly fresh start is showcasing the market’s resilience to political controversy.
Market Recovers After Haven Demand Declines
“We’re still hugely vulnerable to political risks,” said Christopher Jeffery, asset allocation strategist at Legal & General Investment Management in London. “Polling for the first round of the French election is hugely tight. We have no clear indication of how the drama in North Korea will play out. And those factors are more important to us than the ebb and flow of earnings news in the short term.”
Political tensions are at an all-time high, & no one is more aware of this than investors. According to pollsters, the four-way presidential election in France is too close to call. This is a big issue, since some predict drastic repercussions if the wrong candidate wins. There’s a growing sense of populism in current elections that threatens to tear apart what’s left of the European union. Speaking of defectors, the UK is preparing for another monumental vote. This new sense of optimism is helping pull the sterling out of dire straits.
Not to be outdone, the United States is taking a harsh stance against North Korea. The two powers have been walking on eggshells as military strategists scramble to come up with a game plan. Many claim that this is the start of World War III, but it’s still business as usual. Investors are being cautious, but a lower demand for haven assets is spreading hope in these unpredictable times.
Despite the growing risk of war with Korea, finances are still on track in the U.S. The S&P 500 gained 0.3%, leaving it at 2,348.38. This was a welcome recovery, given the fact that this is its 2nd advance in 6 sessions. This surprise comeback was fueled by larger than life earnings by Morgan Stanley, which topped estimates on fixed-income revenue. Not everyone enjoyed a rebound, since IBM suffered its 20th consecutive quarterly sales decline. The dollar also enjoyed a good week, experiencing a 0.4% increase. This pulled it out of a 2-day decline.
Things are looking equally promising in Europe, with stocks & currencies on a shocking rebound. The Stoxx Europe pulled out of Tuesday’s 1.1% slide with a 0.3% increase. News of a surprise vote boosted the pound 0.1% to $1,2853. This came on the heels of a whopping 2.2% increase on Tuesday. Faced with heated elections in France, the euro stayed steady at $1.0727.
Commodities remained mixed after an action-packed week. Gold suffered a 0.5% decline, leaving it at $1,283.42 an ounce. This came on the heels of their highest close since November. While gold floundered, oil pulled out of 2 days of losses. This left it at $52.42 a barrel, which was welcome news since the glut is finally disappearing.
The resilience of stocks is spreading optimism in a world full of dismaying political showboating. Things may seem out of control, but the market is still on track. No matter who wins the elections in France, the industry will be able to weather the storm. As long as war is avoided, 2017 promises to be a surprisingly lucrative year.