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Market Viewpoints

"Nobody intends to put up a wall!"
"A wall is a hell of a lot better than a war.”"

Crimea, the Peninsula on the Black Sea, has held a pivotal place in world history for over 150 years. After a relative peace of 24 years since the end of the Cold war, Crimea is back in focus as Putin looks to annexe it to Russia. The referendum in Crimea is scheduled for this Sunday and will be closely watched. All equity markets will get impacted from an escalation of the Russia-Ukraine crisis and we saw a preview of this earlier this month when the DAX in Germany fell over -3% in one day. On March 9, 2009 the S&P 500 Index (SPX) touched the lows of 666. Five years hence, the SPX is up +177% from these 2009 levels. The SPX Bull has run a good race. The only time the Bear came close to getting the Bull by its horns was in July 2011 when the SPX fell -18% over a two months period, as Europe teetered on the brink of a sovereign debt crisis. The S&P Bull at 5 is not old yet and far from running out of breath. When one talks of the corporate balance sheets now, one refers to the “cash” on it and not the “debt/leverage” ratio. Since the beginning of 2009 only $132 billion has flowed into global equity funds, while $1.2 trillion has flowed into global bond funds. The reallocation from bonds to equities is far from over. The recent February US Jobs report indicated the US economy added 175,000 jobs. The data also indicated that the number of workers in February, who had a job but didn’t work due to bad weather, was 601,000 compared to a ten-year average of 357,000. The number of workers who had reduced hours, due to weather, was 6.9 million compared to the ten-year average of 1.5 million. This is the highest reading for any February on record. It will not go amiss to say, if not for the poor weather, the job growth would have been even stronger in the US. The equity bull therefore has more legs, as the weather effect recedes.

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